CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD moves higher as investors focus on a slew of economic data from both the US and the Eurozone.
• The German economy is expected to have contracted by 0.3% in the third quarter on an annual basis, while the Eurozone as a whole is seen growing by 0.8% YoY.
• Risk-aversion could stay afloat amid uncertainty over the US presidential election.

EUR/USD rises slightly above 1.0800 in European trading hours on Monday. The major currency pair broadly remains sideways ahead of a data-packed week in which traders will get economic growth and inflation data for both the United States (US) and the Eurozone, two key metrics that usually determine the path of interest rates, a crucial driver for currencies.

In the Eurozone, investors are likely to pay closer attention to the economic growth data because inflation is expected to remain near the European Central Bank’s (ECB)  target of 2%. Economists expect the Eurozone economy to have grown by 0.8% on year, higher than the 0.6% expansion seen in the second quarter. When compared with 2Q 2024, economists expect the Eurozone to have grown by 0.2% in Q3, the same pace as the previous quarter.  

A major contribution to the Eurozone economy is expected to have come from Spain and other economies as the economy of its largest nation, Germany, is forecasted to have declined by 0.3% in Q3 compared with the same quarter a year earlier.

At the sidelines of the International Monetary Fund (IMF) meeting last week, ECB policymaker and President of the Deutsche Bundesbank Joachim Nagel emphasized the need to implement the growth package, which has already been announced by the German government, to prevent the economy from getting worse.

"This would make an important contribution to strengthening the forces of growth. But anything that could go beyond that in 2025 would certainly be welcome from the central bank point of view," Nagel said, Reuters reported.

On the interest rate outlook, Nagel said: “We shouldn’t be too hasty,” adding that the decision in December will be based on a slew of indicators such as the US presidential election outcome and inflation data. His comments came after a few ECB officials had supported a larger-than-usual 50-basis points (bps) interest rate cut in December.

Daily digest market movers: EUR/USD gains as US Dollar falls back

• EUR/USD gains in Monday’s European session as the US Dollar retreats after revisiting an almost three-month high. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back from 104.60. However, the outlook of the US Dollar remains firm as investors are expected to stay risk-averse with the United States (US) presidential election just a week away.
• Central bankers, in various discussion panels at the sidelines of the IMF meeting last week, discussed possible consequences of former US President Donald Trump winning against current Vice President Kamala Harris. Traders seem to be taking this scenario as a positive for the US Dollar as Trump vowed to hike tariffs by 10% on all economies, except for China, which would face even higher tariffs of 60%.
• Apart from the uncertainty over the US election, the US Dollar will also be guided by a string of US data to be published this week. Market participants will mainly focus on the JOLTS Job Openings and the Nonfarm Payrolls (NFP) data to get cues about job demand, and the Q3 GDP data for the current status of economic health.

Technical Analysis: EUR/USD holds above 1.0750

EUR/USD continues to hold above the upward-sloping trendline near 1.0750, which is plotted from the October 3, 2023, low at around 1.0450 on the daily time frame. However, the outlook of the major currency pair remains downbeat as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.

The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) remains in the 20.00-40.00 range, indicating a strong bearish momentum.

On the downside, the major pair could see more weakness towards the round-level support of 1.0700 if it slips below 1.0750. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 emerge as key resistances.

The Euro (EUR) is under mild downward pressure; it is likely to drift lower, but is unlikely to break the support at 1.0760. In the longer run, should EUR break above 1.0840, it would signal the end of the decline that started early this month, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR unlikely to break the support at 1.0760

24-HOUR VIEW: “After EUR rebounded strongly last Thursday, we highlighted on Friday that ‘The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is more likely to trade in a 1.0790/1.0840 range.’ Our view was not wrong, as EUR traded between 1.0793 and 1.0839, closing at 1.0793 (-0.31%). There has been a slight increase in momentum. Today, EUR is likely to drift lower, but any decline is unlikely to break the support at 1.0760 (there is another support level at 1.0775). Resistance is at 1.0810; a breach of 1.0825 would indicate that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “We continue to hold the same view as last Friday (25 Oct, spot at 1.0825). As highlighted, should EUR break above 1.0840, it would signal the end of the decline that started early this month. Until then, there is still a chance for EUR to decline further. That said, there is a pair of strong support levels at 1.0760 and 1.0740.”

• EUR/USD tests the upper boundary to re-enter the descending channel pattern.
• If the 14-day RSI falls below the 30 level, it would signal an oversold condition.
• A return to the descending channel could lead the pair to navigate the region around channel’s lower boundary at 1.0670.

EUR/USD inches lower for the second successive day, trading around 1.0780 during the Asian session on Monday. A review of the daily chart shows that the pair tests the upper boundary to return to the descending channel pattern. which could reinforce a bearish bias for the pair.

The 14-day Relative Strength Index (RSI), a key momentum indicator, is slightly above the 30 level. A drop below this threshold would indicate an oversold condition, suggesting the possibility of an upward correction for the EUR/USD pair in the near future.

On the downside, the immediate support appears at the upper boundary of the descending channel at 1.0770 level. A return to the descending channel could put pressure on the pair to navigate the region around the psychological level of 1.0600.

A break below the psychological level of 1.0600 could increase selling pressure, pushing the pair toward testing the lower boundary of the descending channel around the 1.0670 mark.

In terms of resistance, the EUR/USD pair may encounter an immediate barrier around the nine-day Exponential Moving Average (EMA) at 1.0826, followed by the psychological level of 1.0900.

EUR/USD: Daily Chart

• EUR/USD may struggle, as recent US data has increased the odds of the Fed taking a less dovish stance in November.
• The heightened uncertainty surrounding the Middle East and the US presidential election supports the safe-haven US Dollar.
• ECB’s Klaas Knot emphasized the importance of "keeping all options open" to manage potential risks to growth and inflation.

The EUR/USD pair holds steady around 1.0790 during Monday's Asian trading hours, following losses in the previous session. However, the pair may encounter headwinds from a stronger US Dollar (USD), as recent upbeat economic data from the United States (US) has strengthened expectations for a less dovish approach from the Federal Reserve (Fed) in November.

On Friday, data showed the US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9 previously, exceeding the forecast of 69.0. Additionally, Durable Goods Orders dropped by 0.8% month-over-month in September, a smaller decline than the anticipated 1.0% decrease.

Additionally, heightened uncertainty surrounding the Middle East conflict may have strengthened the safe-haven appeal of the US Dollar (USD). Israel's targeted attack on Iran early Saturday, conducted in coordination with Washington and limited to missile and air defense sites, was more restrained than many had anticipated.

The USD is also bolstered by uncertainty surrounding the upcoming US presidential election. Former President Donald Trump’s Republican allies recently faced at least 10 court losses in battleground states that could influence the outcome of the November 5 election.

European Central Bank (ECB) Governing Council member Klaas Knot emphasized on Saturday the importance of "keeping all options open" to manage potential risks to growth and inflation. "Retaining full optionality would act as a hedge against the materialization of risks in either direction to the growth and inflation outlook,” Knot noted, adding, “We believe that our meeting-by-meeting and data-dependent approach has served us well,” according to Reuters.

• EUR/USD returned to its bearish ways on Friday.
• A broad upswing in the Dollar Index continues to pummel the Euro.
• Coming up next week: DST, EU CPI, US PCEPI, and another NFP print.

EUR/USD trimmed a near-term rebound on Friday, slamming the door on a clean bullish recovery and keeping bids trapped near the 1.0800 handle to round out the trading week. Fiber shed another half of a percent from Monday’s opening bids, challking in a fourth straight losing week and dragging price action down even further from late September’s peak just north of 1.1200.

Markets will kick off next week with the start of Daylight Savings Time across the European continent, shifting market open hours by an hour. The front half of the trading week is a sedate affair, with Euro traders looking ahead to Wednesday’s European growth update. Pan-EU Gross domestic Product (GDP) growth is expected to hold steady in the third quarter, forecast to print in-line with the previous quarter’s 0.2%. Meanwhile, the annualized growth figure is expected to tick upwards from 0.6% to 0.8% YoY.

Next Thursday will round out the Euro’s representation on the economic calendar, with preliminary Harmonized Index of Consumer Prices (HICP) inflation for October. Headline EU HICP inflation is expected to rise to 1.9% YoY compared to the previous period’s 1.7%.

Next week is a big showing for US Dollar traders. US Personal Consumption Expenditure Price Index (PCEPI) figures land on Thursday, followed by another round of monthly US Nonfarm Payrolls (NFP) jobs data on Friday. Core US PCEPI is expected to have ticked higher in September, forecast to print at 0.2% MoM compared to August’s 0.1%. US NFP net jobs additions are expected to cool off to a moderate 140K net new jobs added in October, down from the previous month’s blowout 254K print.

EUR/USD price forecast

The EUR/USD pair is currently trading below the 50-day EMA and 200-day EMA, signaling a bearish sentiment in the market. The recent price action shows a strong downward momentum from early October, where the price broke below the 50-day EMA and continued to dip beneath the 200-day EMA, further confirming the bearish bias. The current price near 1.0795 is testing a support zone, as evidenced by the small-bodied candles, suggesting some consolidation or an indecisive phase. If the support holds, we could see a temporary pullback towards the 1.0899 resistance level, coinciding with the 200-day EMA. However, a failure to break higher could invite further downside pressure.

The MACD histogram shows weakening negative momentum, but the signal lines remain in bearish territory, suggesting that sellers are still in control despite a possible short-term correction. If the price fails to break above the 50-day EMA near 1.0962, the pair could extend its decline. Smart Money Concepts (SMC) traders may note the formation of a liquidity grab below previous lows, potentially indicating institutional accumulation for a pullback. However, unless key resistance zones are reclaimed, the overall structure remains bearish, and a break below 1.0750 could open the door for further losses toward 1.0650.

EUR/USD daily chart

ECB policymakers have perhaps said all that can possibly be said about the outlook for rates this week. The upshot of the range of comments from key officials is that rates will fall a bit more—and will quite likely drop again in December—but the case for a 50bps cut has not been made and more measured moves are (for the moment) preferable, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Euro steadies on the day

“Swaps continue to reflect 35bps of easing priced in for the December 12th meeting. Repricing ECB risks may give the EUR a bit more of a foothold around 1.08 in the short run.”

“The EUR closed on a relatively solid footing yesterday. The gain was relatively mild but it was the biggest one-day rise in a month. Bearish technical momentum looks neutral on the intraday chart and the daily RSI oscillator is starting to correct from oversold—a positive.”

“Spot is trading above minor trend resistance on the 6-hour chart this morning and that should provide sone underpinning for the EUR at 1.0800/10 intraday. A push above 1.0875, to set a fresh, short-term high, is needed to generate more lift, however.”

Most recently, our Fed expectations were largely in line with those of the market. Just like the market, we expect the Fed to lower its key rate to around 3½%. Therefore, there is little to be said for idiosyncratic USD strength. However, we had previously expected the ECB to cut its key rate by far less than the market expects. This is no longer the case, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

EUR/USD target us lowered from 1.15 to 1.11

“Part of the current USD strength is certainly due to the fact that Donald Trump's chances of returning to the White House have increased in view of recent polls. Since Trump's tariff and tax policies are widely expected to have an inflationary effect, the new polls are likely to have contributed to the recent dollar strength. In the event of Kamala Harris's election victory, there is thus potential for a setback for the dollar. From today's perspective, weighing up the risks, a slight weakening of the dollar appears to be the more likely scenario for the coming months.”

“In the US, GDP in Q4 2025 will be 1.9% higher than in the same quarter of the previous year – after 2.3% in Q4 2024. This means that the US would continue to grow significantly faster, but not quite as much faster as at present. However, because the US growth advantage is likely to have been responsible for a good part of the USD strength so far, even a small reduction in this US advantage is a rather good signal for the Euro.”

“We are lowering our EUR/USD target from 1.15 to 1.11. The greatest risk for our forecast would be a markedly inflationary US economic policy combined with a Fed that can continue to fight inflationary pressure decisively.”

• EUR/USD trades above 1.0800, but the downside bias remains firm due to multiple headwinds.
• Traders expect the ECB to announce a sizeable interest rate cut in December.
• The Fed is expected to pursue a gradual rate-cut cycle.

EUR/USD strives to extend Thursday’s recovery above 1.0800 in Friday’s European session. The major currency pair bounced back on Thursday after the release of the flash Hamburg Commercial Bank (HCOB) Eurozone Purchasing Managers Index (PMI) report for October. 

The Euro’s recovery could be short-lived as the preliminary PMI report showed that the Eurozone’s economic activity continued to contract, with the flash Composite PMI declining to 49.7 in October. Preliminary readings showed that activities in the manufacturing sector continued to contract, with manufacturing PMI below the 50 threshold that separates expansion from contraction for 28 months, and the service sector output expanded surprisingly at a slower pace. A continuous decline in the Eurozone business activity points to uncertainty over economic growth. 

Meanwhile, growing speculation for a larger-than-usual interest rate cut by the European Central Bank (ECB) in its next policy meeting in December is also expected to push back the shared currency pair inside the woods. This year, the ECB has already reduced its Deposit Facility Rate three times by 25 basis points (bps) to 3.25%. 

Market expectations for the ECB to reduce its key borrowing rates by 50 bps in December have been boosted by dovish commentaries from a few policymakers who have highlighted risks of inflationary pressures remaining below the bank’s target of 2% due to fears of a downturn.

This week, Governor of the Bank of Portugal and ECB policymaker Mario Centeno said that the option of a 50 bps rate cut in December is on the table. Centeno warned that downside risks to growth are accumulating.

On the economic front, data released on Friday showed that the German IFO Business Climate, Current Assessment, and Expectations for October have come in better than expectations and prior releases. Historically, improving market sentiment points to a revival in economic conditions but the case appears to be unlikely due to weak business activity.

Daily digest market movers: EUR/USD bounces back at US Dollar’s expense

• A recovery in the EUR/USD pair is also driven by a retracement move in the US Dollar (USD) in European trading hours. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, hovers near 104.00 after correcting from a fresh 12-week high of 104.55.
• The near-term appeal of the US Dollar remains firm on multiple tailwinds, such as growing bets for the Federal Reserve (Fed) to follow a more gradual rate-cut cycle and rising expectations of former US President Donald Trump to win the presidential election against current Vice President Kamala Harris.
• Investors' confidence in the Fed’s gradual policy-easing cycle is backed by upbeat Nonfarm Payrolls (NFP) and Retail Sales data for September and better-than-expected flash S&P Global PMI data for October, which pointed to sustainable economic growth.
• On Friday, investors will focus on US Durable Goods Orders data for September, which will be published at 12:30 GMT. The economic data is estimated to have declined by 1% after remaining flat in August.

Technical Analysis: EUR/USD remains below 200-day EMA

EUR/USD holds recovery above 1.0800 in European trading hours. However, the outlook of the major currency pair remains downbeat as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.

The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) remains inside the 20.00-40.00 range, indicating a strong bearish momentum. However, a recovery move remains on the cards as conditions turn oversold.

On the downside, the major could see more weakness towards the round-level support of 1.0700 if it slips below the upward-sloping trendline (plotted from the October 3 low around 1.0450) at 1.0750. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 will be the key resistances for the pair.
 

EUR saw modest rebound amid USD pullback, and European PMIs surprised to the upside. Pair was last at 1.0825, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Bearish momentum on daily chart shows signs of fading

“EUR saw modest rebound amid USD pullback while prelim PMIs surprised slightly to the upside. In particular, German manufacturing, services PMIs surprised.”

“Bearish momentum on daily chart shows signs of fading while RSI rose from near oversold conditions. We still call for rebound risks.”

“Resistance at 1.0830 (61.8% fibo retracement of 2024 low to high), 1.0870 (200 DMA), 1.0930/50 levels (21, 100 DMAs). Support 1.0780, 1.0740 (76.4% fibo).”

The Euro (EUR) is likely to trade in a 1.0790/1.0840 range. In the longer run, should EUR break above 1.0840, it would signal the end of the decline that started early this month, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR is likely to trade in a 1.0790/1.0840 range

24-HOUR VIEW: “Two days ago, EUR broke below the support at 1.0770 and reached a low of 1.0760. Yesterday, when EUR was at 1.0780, we pointed out ‘Oversold conditions combined with tentative signs of slowing momentum suggest EUR is unlikely to weaken much further.’ We expected EUR to ‘trade in a range between 1.0760 and 1.0810.’ However, instead of trading in a range, EUR rebounded strongly to 1.0829, closing at 1.0827 (+0.43%). The rebound appears to be running ahead of itself, and instead of continuing to rise, EUR is more likely to trade in a 1.0790/1.0840 range.”

1-3 WEEKS VIEW: “We highlighted yesterday (24 Oct, spot at 1.0780) that for EUR to continue to decline, it ‘must break clearly below the significant support at 1.0740.’ We also highlighted that ‘The likelihood of EUR breaking below 1.0740 will remain intact, provided that 1.0840 (‘strong resistance’ level) is not breached.’ EUR subsequently rebounded to a high of 1.0829. Downward momentum is beginning to slow. Should EUR break above 1.0840, it would signal the end of the decline that started early this month.”

• EUR/USD ticks lower on the last day of the week, albeit it lacks any follow-through selling. 
• A softer tone around the US bond yields undermines USD and lends support to the major.
• Expectations for a less aggressive Fed easing and more ECB rate cuts should cap the upside.

The EUR/USD pair struggles to capitalize on the previous day's strong move-up of around 60 pips and trades with a mild negative bias during the Asian session on Friday. Spot prices, however, manage to hold comfortably above the 1.0800 mark and a nearly four-month low touched on Wednesday amid subdued US Dollar (USD) price action.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, consolidates after the overnight pullback from its highest level since July 30 amid a softer tone surrounding the US Treasury bond yields. Apart from this, signs of stability in the equity markets turn out to be another factor undermining the safe-haven buck, which, in turn, helps limit losses for the EUR/USD pair.

That said, growing acceptance that the Federal Reserve (Fed) will proceed with smaller rate cuts amid a still resilient economy, along with deficit-spending concerns after the US presidential election, act as a tailwind for the US bond yields. Apart from this, persistent geopolitical risks stemming from the ongoing conflicts in the Middle East favors the USD bulls and should cap the EUR/USD pair. 

Meanwhile, the flash Eurozone PMIs released on Thursday showed that the economy stalled for the second successive month in October and slowing inflation. This, in turn, validates the European Central Bank's (ECB) view that the disinflationary process is well on track and supports prospects for further policy easing, which might undermine the Euro and contribute to keeping a lid on the EUR/USD pair. 

Market participants now look to the release of the German Ifo Business Climate Index for some impetus ahead of the US macro data – Durable Goods Orders and the revised Michigan Consumer Sentiment Index. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and assist traders in grabbing short-term opportunities around the EUR/USD pair.

• EUR/USD reclaimed the 1.0800 handle on Thursday.
• EU PMI figures came in mixed, giving Euro bulls just enough ammo.
• US Durable Goods Order and UoM Consumer Inflation Expectations in the barrel for Friday.

EUR/USD made a half-hearted recovery on Thursday, rebounding four-tenths of one percent and clawing back north of the 1.0800 handle. Despite a late-week bounce, Fiber remains steeply off of recent highs after declining over 4% top-to-bottom from late September’s peak bids near 1.1200.

Pan-European HCOB Purchasing Managers Index (PMI) figures mixed early Thursday, with the EU Manufacturing PMI from October rising to a firmer 45.9 from the previous month’s 45.0, eclipsing the expected 45.1. On the low side, October’s EU Services PMI sank to 51.2, lagging below the previous month’s 51.4 and missing the forecast uptick to 51.6.

The Euro’s representation on this week’s economic data docket is functionally wrapped up, with only low-tier data on the offer for Friday. Markets will have to contend with US Durable Goods Orders and an update to 5-year Consumer Inflation Expectations from the University of Michigan (UoM). Headline US Durable Goods Orders in September are expected to contract a full 1.0% MoM, extending the recent downturn after August’s flat-footed 0.0% print. October’s UoM 5-year Consumer Expectations are expected to come in close to their previous print of 3.0%.

EUR/USD price forecast

The EUR/USD pair continues its corrective movement, having found support just above the 1.0750 level following a sharp decline from the highs near 1.1250 in mid-September. The pair has briefly rebounded from this key support, but remains below both the 50-day EMA (blue line) at 1.0968 and the 200-day EMA (black line) at 1.0896, indicating that the overall trend is still tilted to the downside. The moving averages are sloping downward, confirming bearish momentum in the near term. The recent bounce appears corrective, and unless the pair breaks above the 1.0900 area, sellers may look to reenter the market.

The MACD indicator shows a continued bearish bias, with the MACD line (blue) remaining below the signal line (orange), and the histogram firmly in negative territory. However, there are early signs of potential exhaustion in the selling pressure, as the histogram shows less pronounced red bars. This suggests that while the bears are still in control, the momentum is waning. A break above the 200-day EMA could signal a bullish recovery, but failure to clear that resistance would likely lead to further downside, with immediate support around the 1.0750 level and a potential test of the 1.0650 zone in case of extended selling pressure.

EUR/USD daily chart

The Euro (EUR) is nudging back over the 1.08 line as trading gets going in North America, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR regains 1.08 handle despite mixed PMI data

“October PMI data were mixed—French data were weaker than September and came in below expectations. German data were the opposite which produced on expectations or slightly better than forecast data for the preliminary Eurozone overall. The broader economic picture remains soft which will encourage expectations of more ECB easing ahead—but with 25bps clips of cuts rather than 50bps.”

“Spot’s move back above 1.08, albeit barely so, gives the EUR a mildly positive look as it suggests the support zone in the upper 1.0780/00 range noted earlier this week is having some effect on price (despite a brief push to the 60s yesterday). The EUR undertone remains weak, however, and spot has a lot of work to do to improve meaningfully.”

“EUR/USD remains deeply oversold, which bolsters the potential for a stabilization in spot, or even a mild rebound. Spot will need to break above 1.0875 to show any real signs of (short-term) technical strength.”

• EUR/USD holds support near 1.0760 while the near-term outlook remains downbeat amid weakness in Eurozone business activity.
• Traders look for fresh cues about the ECB’s likely interest rate cut size in December.
• EUR/USD has also been benefitted by a slight correction in the US Dollar.

EUR/USD finds fresh buying interest near a three-month low of 1.0760 in Thursday’s European session. The major currency pair strengthens even though the preliminary Hamburg Commercial Bank (HCOB) Composite Purchasing Managers Index (PMI) data showed that Eurozone's economic activity continued to contract in October. The PMI ticked higher to 49.7 from 49.6 in September, below the 50 threshold that separates expansion from contraction, amid a continuous decline in the manufacturing sector activity and moderate growth in the service sector output.

“The eurozone is stuck in a bit of a rut, with the economy contracting marginally for the second month running. The ongoing slump in manufacturing is being mostly balanced out by small gains in the service sector. At the country level, it can be noted that the deterioration of the situation in France was met by a slight moderation in the decline in Germany. For now, it is not clear whether we will see a further deterioration or an improvement in the near future,” said Dr. Cyrus de la Rubia, Chief Economist at HCOB.

The HCOB PMI report also showed subdued business confidence, weak orders from domestic and overseas markets, a modest increase in input prices, and a reduction in the workforce, which points to the need for economic stimulus that would prompt expectations of more interest rate cuts by the European Central Bank (ECB).

The ECB has already reduced its Deposit Facility Rate by 75 basis points (bps) this year to 3.25%, and traders expect the central bank to cut again in December. Meanwhile, market participants are uncertain about the likely rate-cut size as the option of a larger-than-usual reduction has come into the picture.

On Wednesday, Governor of the Bank of Portugal and ECB policymaker Mario Centeno said that the option of a 50 bps rate cut in December is on the table. Centeno warned that downside risks to growth are accumulating.

Daily digest market movers: EUR/USD gains at US Dollar’s expense

• EUR/USD has also added some gains in the European session on Thursday at the US Dollar’s (USD) expense. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, corrects slightly to near 104.20 after posting a fresh 12-week high around 104.50 on Wednesday.
• However, the near-term outlook of the US Dollar remains firm as investors expect the Federal Reserve (Fed) to follow a more gradual rate-cut approach. Wednesday’s Fed Beige Book showed that the overall business activity was little changed through early October, and there was a slight uptick in hiring with moderate growth in inflationary pressures.
• Meanwhile, the uncertainty over the United States (US) presidential election on November 5 has also kept strength in the US Dollar afloat. Market participants worry that the scenario of Trump winning the election will result in higher tariffs, which will have a significant impact on closed trading partners to the US.
• Going forward, the next move in the US Dollar will be driven by the preliminary US S&P Global PMI data for October and the Durable Goods Orders data for September, which will be published at 13:45 GMT and on Friday, respectively.

Technical Analysis: EUR/USD hovers near three-month low of 1.0760

EUR/USD finds temporary support near 1.0760 in European trading hours. However, the outlook of the major currency pair remains downbeat as it stays below the 200-day Exponential Moving Average (EMA), which trades around 1.0900.

The downside move in the shared currency pair started after a breakdown of a Double Top formation on the daily time frame near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) indicator dives below 30.00, indicating a strong bearish momentum. However, a recovery move remains on the cards as conditions turn oversold.

On the downside, the major could see more weakness towards the round-level support of 1.0700 if it slips below the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA near 1.0900, and the psychological figure of 1.1000 will be the key resistance for the pair.

The Euro (EUR) is expected to trade in a range between 1.0760 and 1.0810. In the longer run, to continue to decline, EUR must break the significant support at 1.0740, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

Expected to trade between 1.0760 and 1.0810

24-HOUR VIEW: “Yesterday, when EUR was at 1.0800, we indicated that EUR ‘is under mild downward pressure.’ We expected it to ‘edge lower, but is unlikely to break the major support at 1.0770.’ However, EUR fell more than expected to 1.0760, recovering slightly to close at 1.0781 (- 0.15%). Oversold conditions combined with tentative signs of slowing momentum suggests EUR is unlikely to weaken much further. Today, we expect EUR to trade in a range between 1.0760 and 1.0810.”

1-3 WEEKS VIEW: “Our most recent narrative was from two days ago (22 Oct, spot at 1.0815), wherein ‘despite the relatively sharp decline, downward momentum has not improved much.’ We indicated that ‘there is a chance for EUR to drop to 1.0770 before stabilisation can be expected.’ Yesterday, EUR dropped to 1.0760. Although, there is no sign of stabilisation yet, there has been no significant increase in momentum either. To continue to decline in a sustained manner, EUR must break the significant support level at 1.0740 (see 1-3 months update below). The likelihood of EUR breaking below 1.0740 will remain intact, provided that 1.0840 (‘strong resistance’ level was at 1.0870 yesterday) is not breached. Looking ahead, if EUR breaks clearly below 1.0740, the next level to watch is another significant support at 1.0665.”

• EUR/USD attracts some buyers on Thursday amid a modest USD pullback from a three-month high.
• Expectations for a less aggressive policy easing by the Fed should help limit losses for the Greenback.
• Bets for a jumbo ECB rate cut in December might undermine the Euro and cap the upside for the pair. 

The EUR/USD pair gains some positive traction during the Asian session on Thursday and for now, seems to have snapped a three-day losing streak to its lowest level since early July, around the 1.0760 area touched the previous day. Spot prices climb back closer to the 1.0800 mark in the last hour amid a modest US Dollar (USD) downtick, though the fundamental backdrop warrants some caution for bullish traders. 

The US Treasury bond yields retreat from a three-month high prompt some USD profit-taking following the recent strong rally to the highest level since late July. That said, growing acceptance that the Federal Reserve (Fed) will proceed with modest rate cuts, along with investors' nervousness ahead of the US Presidential election on November 5, should act as a tailwind for the safe-haven Greenback. Apart from this, dovish European Central Bank (ECB) expectations should keep a lid on any meaningful appreciating move for the EUR/USD pair.

The annual inflation rate in the Eurozone fell to 1.7% in September, below the ECB’s 2% target for the first time since June 2021. This validates the central bank's view that the disinflationary process is well on track and supports prospects for further policy easing. Moreover, ECB Mario Centeno said on Wednesday that downside risks dominate growth and inflation and that a 50 basis points (bps) rate cut in December is on the table. Moreover, ECB's Bostjan Vasle said that recent data presents some risks that might delay the expected improvement in growth.

This, in turn, might hold back traders from placing aggressive bullish bets around the shared currency and cap the upside for the EUR/USD pair. Market participants now look to the release of the flash PMI prints from the Eurozone and the US, which might provide fresh insight into the health of the global economy and in turn, influence the broader risk sentiment. Apart from this, the US bond yields will drive the USD and provide some impetus. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

• EUR/USD is down eight-tenths of a percent for the week.
• Fiber bids are getting crushed by waffling speech from ECB planners.
• EU and US PMI figures due on Thursday could spark fresh momentum.

EUR/USD shed another fifth of a percent on Wednesday as the Fiber crumples ahead of Thursday’s fresh round of Purchasing Managers Index (PMI) figures. ECB officials talked down economic concerns, reiterating the need for caution when weighing future rate cuts. FX markets promptly responded by pummeling the Euro further into the dirt, hitting a 16-week low.

Global PMI figures are due for a rolling release on Thursday. Markets have high expectations for pan-EU PMI survey results, with median market forecasts calling for a slight uptick in October’s EU Services PMI to 51.6 from September’s 51.4. On the US side, median market forecasts expect October’s US PMI figures to come in mixed, with the Manufacturing component expected to rise to 47.5 from 47.3, while the Services PMI component is expected to tick slightly lower to 55.0 from 55.2.

EUR/USD price forecast

EUR/USD continues to slide lower as the pair tests support near the 1.0780 level. The recent price action shows a significant breakdown below both the 50-day EMA, currently at 1.0975, and the 200-day EMA at 1.0908, signaling a shift in market sentiment to the downside. The sustained selling pressure has pushed the pair into a bearish phase, with sellers eyeing further downside towards the 1.0750 support zone. A break below this key psychological level could trigger a more aggressive selloff towards the 1.0700 handle.

The MACD indicator remains firmly in bearish territory, with the MACD line continuing to trend below the signal line and the histogram deepening in negative values. This suggests that downward momentum is still intact, and any attempts at a reversal may face stiff resistance. Traders should be cautious of oversold conditions, but as long as the price remains below the moving averages, the bearish bias will likely persist. Any bounce from current levels could face immediate resistance near the 1.0900 region, making it a key level to watch for potential shorting opportunities.

EUR/USD daily chart

The Euro (EUR) looks quite soft below 1.08, pressured by broader USD gains on the one hand and simmering speculation that the ECB could cut rates aggressively in December, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR slips under 1.08

“Swaps are pricing in 35bps of easing risk currently. ECB President Lagarde is talking (10ET) again in the US this morning, as are some of her governing council colleagues. Yesterday’s comments from ECB policymakers stressed optionality on forthcoming policy decisions, leaving the door open to a pickup in the pace of easing, if required.”

“EUR/USD is trading at new lows for the move down this morning and pressuring the last remaining supports below 1.08 (retracement support at 1.0795 and the early August low at 1.0778). The EUR sell-off is overshooting, in my opinion, with intraday and daily oscillator signals highlighting an increasingly oversold situation.”

“Momentum is king, however. Unless the EUR can steady and recover in the next day or so, the move lower could extend towards 1.05/1.06.”

The current resilience of the US economy is in stark contrast to that of Germany. The extent of the vulnerability of the EUR next year under either a Trump or a Harris presidency will depend on how dovish the ECB becomes, Rabobank’s FX analyst Jane Foley notes.  

Parity is within the realm of possibilities

“The ECB is mandated to target inflation. However, there are signs that growth concerns have spread within the Governing Council. Yesterday, the IMF forecast no growth for Germany this year, following a -0.3% contraction in 2023. Germany’s government expects economic activity to contract by -0.2% this year.”

“This suggests that Germany is on course for being the weakest economy in the G7 for the second consecutive year. The IMF point to the weakness in manufacturing in both Germany and Italy. German exporters face a weak China, the ongoing impact of the energy transition and an ageing demographic which has shrunk the pool of available labour.”

“The latter, however, is inflationary. In view of economic headwinds, we would expect that many German exporters would welcome further softening in monetary conditions and a lower value for EUR/USD. It would appear that parity is within the realm of possibilities. We will revise our forecasts in early November.”