Euro collapses below 1.12 as Fed hawkish rhetoric lifts the US Dollar

The Euro experienced a significant drop below the 1.1200 mark on Monday, touching 1.1155 as it fell by 0.40%. The decline came after hawkish remarks from a Federal Reserve policymaker and heightened geopolitical tensions, particularly the US-Iran conflict and Russia's invasion of Ukraine. The holiday in the United States resulted in quiet markets, but over the weekend, news of a potential ceasefire in the Russia-Ukraine war on energy facilities brought positive sentiment from investors.

They rushed to buy oil, with the US President's announcement of a ceasefire in the Ukraine war on energy facilities sparking optimism. Tensions in the Hormuz Strait remained high, despite Iran's acknowledgment that the US agreed to some of Tehran's seven conditions to reopen the Strait, this move further pushed up the West Texas Intermediate (WTI) oil price, which climbed over 1.60% to $93.17 on Monday.

In the US, economic data was absent but investors kept an eye on Cleveland Fed President Beth Hammack, who suggested that higher rates are necessary due to inflation's widening impact. In the coming week, traders will focus on Fed speakers, particularly Fed Chair Kevin Warsh, and the release of US inflation figures on October 14 and Producer Price Index (PPI) on October 15.

The Eurozone's attention would be on Germany's Harmonized Index of Consumer Prices (HICP) and ECB members Elderson and Escriva's speeches. The EUR/USD pair is currently trading under a bearish phase, staying below the simple moving averages (SMA) group around 1.1496. The pair also remains under the long-running downward resistance trend line, which now acts as an additional cap near 1.1295, while the Relative Strength Index (RSI) is in the oversold territory at 22.

Traders should watch for resistance near the former downward trend line area around 1.1295, followed by the significant 50-, 100-, and 200-day SMA band at approximately 1.1496, which supports the mid-term downtrend.