CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD receives downward pressure as the ECB is widely expected to deliver a 25 basis point rate cut on Thursday.
• Rising Middle-East tensions put pressure on the risk-sensitive Euro.
• The US Dollar gains ground as the Fed is projected to slow the pace of borrowing cost reductions.

EUR/USD continues its downward trend for the fourth consecutive session, hovering around 1.0920 during the Asian trading hours on Monday. The Euro faces downward pressure as the European Central Bank (ECB) prepares for its monetary policy decision on Thursday.

The ECB is widely anticipated to reduce its Main Refinancing Operations Rate by 25 basis points. Officials have signaled the potential for further reductions in response to the European Union's economic challenges. The central bank has already lowered rates twice this year and is expected to continue with incremental 25 basis point cuts in future meetings.

On the geopolitical front, escalating tensions in the Middle East have sparked concerns of a broader regional conflict, strengthening the safe-haven US Dollar and putting pressure on the risk-sensitive EUR/USD pair. According to CNN, at least four Israeli soldiers were killed, and over 60 people were injured in a drone attack in north-central Israel on Sunday.

The decline of the EUR/USD pair could also be linked to a stronger US Dollar (USD), fueled by expectations that the US Federal Reserve (Fed) will slow the pace of borrowing cost reductions more than previously anticipated.

Traders are looking for a 25 basis points (bps) rate cut from the Fed in November, following the release of the Producer Price Index (PPI) data from the United States last Friday. According to the CME FedWatch Tool, the markets are pricing in an 86.9% chance of a 25 basis point rate cut in November, with no expectation for a 50-basis-point reduction.

In September, the annual Producer Price Index (PPI) increased by 1.8%, following a 1.9% rise in August, and exceeded market expectations of 1.6%. Meanwhile, the annual core PPI, which excludes food and energy prices, rose by 2.8%, surpassing analysts' forecast of 2.7%.

The Euro (EUR) is a little firmer on the session but effectively holding within yesterday’s spot range in quiet trade, Scotiabank’s FX Chief FX Strategist Shaun Osborne notes.

EUR steadies in low 1.09s

“There are few inputs for markets to respond to so far today. Markets are all but fully priced for a dovish pivot from the ECB to unfold— 25bps cuts at each of the next two policy decisions—and the widening in EZ/US spreads has stabilized as a result. Note estimated FV for EUR/USD has steadied in the low 1.09s.”

“From here, spot movement will be driven by either, or both, evolving Fed policy expectations into year end and positioning into and around the US presidential election.”

“Spot losses have steadied over the past two sessions, with intraday chart patterns showing a bullish ‘hammer’ signal developing on the intraday candle chart around yesterday’s test of 1.09. Trends remain negative though and minor EUR gains to the mid/upper 1.09s are meeting resistance. Broader technical patterns still suggest downside risk to the 1.08 area in the coming weeks.” 

• EUR/USD finds temporary support near 1.0900 as the Euro outperforms its major peers.
• The Euro gains despite firm ECB dovish bets amid a faster-than-expected decline in Eurozone inflationary pressures.
• Investors await the US PPI for fresh cues on the Fed’s interest rate outlook.

EUR/USD moves slightly higher to near 1.0950 on Friday after a sharp recovery from the two-month low of 1.0900 recorded on Thursday. The pullback move in the major currency pair could be short-lived as the US Dollar (USD) clings to gains ahead of the United States (US) Producer Price Index (PPI) data, which will be published at 12:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto gains near 103.00.

Investors will pay close attention to the US PPI data as it will indicate the pace at which prices of goods and services were raised by producers at factory gates in September. Producer inflation is majorly influenced by the change in input cost and households’ demand.

Economists expect the annual headline PPI inflation to have decelerated to 1.6% from 1.7% in August. The annual core PPI – which strips off volatile food and energy prices – is estimated to have accelerated sharply by 2.7% from the former release of 2.4%. The monthly headline and core PPI are expected to have grown at a slower pace of 0.1% and 0.2%, respectively.

The US Dollar is broadly upbeat as Atlanta Federal Reserve (Fed) Bank President Raphael Bostic has brought the option of leaving interest rates unchanged at 4.75%-5.00% in November on the table. 

The comments from Bostic in an interview with the Wall Street Journal on Thursday indicated that he is comfortable with skipping the interest rate cut next month. Bostic said, “This choppiness to me is along the lines of maybe we should take a pause in November and I'm definitely open to that.” His comments came after the release of the US Consumer Price Index (CPI) report, which showed that inflationary pressures rose at a faster-than-expected pace in September.

Daily digest market movers: EUR/USD rises slightly as Euro gains

• EUR/USD edges higher to near 1.0950 in Friday’s European session. The major currency pair moves slightly higher as the Euro (EUR) performs strongly against its major peers despite firm expectations that the European Central Bank (ECB) will cut interest rates further in both monetary policy meetings remaining this year.
• The ECB has already reduced its Deposit Facility Rate by 50 basis points (bps) to 3.5% this year. The central bank is expected to cut them further by 50 bps again in the remaining year. Traders have priced in two rate cuts of 25 bps, one of which will come next week and the second in December.
• ECB dovish bets have been accelerated by a faster-than-expected decline in Eurozone inflationary pressures and growing risks to economic growth. This week, ECB policymaker and Governor of the Greek Central Bank Yannis Stournaras said that price pressures are declining faster than the ECB forecasted in September. Stournaras also backed two more rate cuts in each of the remaining meetings this year, emphasizing the need to reduce them further in 2025.
• Meanwhile, revised estimates for the German Harmonized Index of Consumer Prices (HICP) for September have shown that price pressures remained below the bank’s target of 2% at 1.8%, as shown in flash estimates.
• On the economic front, the growth prospects of the Eurozone are vulnerable as its largest nation, Germany is forecasted to close the year with a decline in output by 0.2%, the German economic ministry said.

Technical Analysis: EUR/USD finds cushion near 200-day EMA

EUR/USD finds temporary support near the 200-day Exponential Moving Average (EMA) around 1.0900. The near-term outlook of the pair remains uncertain as the 20- and 50-day EMAs are on course to deliver a bear cross near 1.1020.

The shared currency pair weakened after delivering a breakdown of a Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) settles inside the bearish range of 20.00-40.00, suggesting more weakness ahead.

Looking down, the pair is expected to find support near the round-level support of 1.0800 if it decisively breaks below the 200-day EMA around 1.0900. On the upside, the September 11 low of 1.1000 and the 20-day EMA at 1.1090 will be major resistance zones.

Instead of weakening further, the Euro (EUR) is more likely to trade in a range between 1.0910 and 1.0960. In the longer run, outlook for EUR remains negative; slowing momentum suggests that the probability of breaking the 1.0860/1.0885 support zone is not high, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Low probability of breaking the 1.0860/1.0885 support zone

24-HOUR VIEW: “After EUR edged lower to 1.0936 two days, we indicated yesterday that ‘there has been a slight increase in momentum, and EUR is likely to continue to edge lower.’ We added, ‘it remains to be seen if it has enough momentum to break the major support at 1.0900.’ In NY trade, EUR dropped briefly to 1.0898, rebounding to close largely unchanged at 1.0935 (-0.04%). The rebound in oversold conditions and slowing momentum suggests that instead of weakening further, EUR is more likely to trade in a range, probably between 1.0910 and 1.0960.”

1-3 WEEKS VIEW: “We turned negative in EUR last Wednesday (02 Oct), when EUR was trading at 1.1065 (see annotations in the chart below). As we tracked the decline, in our update from yesterday (10 Oct, spot at 1.0940), we indicated that ‘the outlook for EUR remains negative, and the next level to watch is 1.0900.’ In NY trade, EUR dropped to 1.0898, rebounding to close largely unchanged. While the outlook remains negative, downward momentum appears to be slowing, and the probability of EUR breaking the significant support zone between 1.0860 and 1.0885 is not high for now. However, only a breach of 1.0995 (‘strong resistance’ level was at 1.1010 yesterday) would mean that the weakness in EUR has stabilised.”

• EUR/USD trades with mild losses near 1.0935 in Friday’s early European session. 
• A warmer US inflation reading supports Fed hawks' call for gradual interest rate cuts.
• The ECB is expected to deliver a cut to the 3.5% deposit rate next week.

The EUR/USD pair remains on the defensive around 1.0935 during the early European session on Friday. The hotter-than-expected US inflation reading on Thursday has provided some support to the Greenback and caps the upside for the pair. 

The warmer US Consumer Price Index (CPI) reading coupled with the stronger-than-expected September jobs report strengthens the chance that any future rate cuts by the US Federal Reserve (Fed) should be gradual. The CME FedWatch Tool showed investors boost the odds that the Fed will trim its policy rate by 25 basis points (bps) in November to 83.3% following the CPI release.

Market players will take more cues from the US Producer Price Index (PPI) for September, along with the preliminary reading of the Michigan Consumer Sentiment Index for October, which is due on Friday. The headline PPI is expected to show an increase of 1.6% YoY in September, while the core PPI is estimated to see a rise of 2.7% YoY in the same reported period. Nonetheless, if the report shows a softer outcome, this could undermine the US Dollar (USD) against the shared currency. 

The European Central Bank (ECB) policymakers support a rate cut amid the economic slowdown, which might exert some selling pressure on the Euro (EUR). The ECB is anticipated to lower rates twice this year and a cut to the 3.5% deposit rate next week. More than 90% of economists polled by Reuters expect a reduction next week, with a similar majority betting on a follow-up move in December.

The Harmonized Index of Consumer Prices (HICP) inflation data from Germany is due later on Friday, which is expected to hold steady at 1.8% YoY in September. 

• EUR/USD tested lower on Thursday, finding the 200-day EMA.
• Euro data remains thin this week, leaving Fiber to churn on US data.
• Coming up on Friday: US PPI inflation, UoM consumer sentiment figures.

EUR/USD managed to maintain a finger grip on chart paper north of the 1.9000 handle. Fiber wound up closing lower, but recovered just enough to pull back from a deeper test of the 200-day Exponential Moving Average (EMA) near the 1.0900 handle.

Headline US CPI inflation fell less than expected through the year ended in September, declining from 2.5% to 2.4%. Median market forecasts had called for a print of 2.4% YoY. On the other hand, core US CPI inflation ticked higher YoY in September, rising to 3.3% from the previous 3.2%. 

US Initial Jobless Claims unexpectedly rose for the week ended October 4, climbing to 258K week-on-week and clipping the highest rate of new jobless benefits seekers since June of 2023. 

Mixed rate-impacting data flummoxed rate markets on Thursday. Rising unemployment figures bolster hopes for rate cuts as the Federal Reserve (Fed) looks to keep the US labor market afloat, while still-hot inflation makes it harder for investors to expect a faster pace and depth of rate trims.

Meaningful European economic data points are almost entirely absent on Friday, leaving Fiber traders at the mercy of overall Greenback flows to wrap up the trading week.

US Producer Price Index (PPI) inflation will follow up during the US market session. September’s core PPI print for the year ended in September is expected to accelerate to 2.7% YoY from last month’s 2.4%.

University of Michigan 5-year Consumer Inflation Expectations for October will also print on Friday, alongside the UoM Consumer Sentiment Index. The UoM sentiment index is expected to grind higher to 70.8 from 70.1, while 5-year consumer sentiment expectations were unable to price out a forecast, though the indicator did move higher in the previous month.

EUR/USD price forecast

The EUR/USD pair is trading around 1.09343, experiencing a slight decline of 0.05% for the day as selling pressure continues to weigh on the currency pair. The price action is testing the 200-day Exponential Moving Average (EMA) at 1.09036, a critical level of support that could determine the pair’s next directional move. A break below this level could accelerate downside momentum, potentially opening the door to further declines toward the 1.08500 level, a key psychological barrier. The 50-day EMA, currently at 1.10289, has now become a resistance level after the recent bearish break below it.

The overall trend seems to be shifting towards a more bearish outlook in the short term. The steep decline from the recent highs near 1.1200 indicates that bullish momentum has largely faded. The price has consistently printed lower highs and lower lows, signaling a clear downtrend. Traders will likely keep an eye on how the pair reacts around the 200-day EMA in the coming sessions, as a sustained move below this level could confirm a broader shift in market sentiment toward the downside.

In the broader context, the EUR/USD's price action reflects a market that is increasingly sensitive to economic data releases and central bank decisions. The pair's recent decline coincides with a stronger U.S. dollar, driven by expectations of tighter monetary policy from the Federal Reserve. Eurozone economic data, such as inflation and growth figures, will be key in determining whether the euro can find support at current levels or if further downside risks will materialize. Traders should watch for any signs of reversal, but for now, the technical setup points toward additional weakness.

EUR/USD daily chart

The Euro (EUR) continued to trade with a heavy bias, weighed by dovish remarks from ECB officials. EUR was last at 1.0928 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Double-top bearish reversal is underway

“Kazaks said rate cuts are necessary as economy is weak.. rates can go to neutral if inflation at 2% in 2025 while Kazimir said can’t rule out rate cut at next meeting even though he is not as convinced as media reports on Oct cut.”

“Daily momentum is bearish bias while RSI fell near oversold conditions. Risks remain skewed towards the downside. Double-top bearish reversal is underway. Support at 1.0900/30 levels (100 DMA, 50% fibo), and 1.0830 (61.8% fibo).”

“Resistance at 1.1050/60 levels (50 DMA, 23.6% fibo retracement of 2024 low to high) and 1.1090 (21 DMA).”

The Euro (EUR) losses have extended—slightly— following last week’s hefty fall as investors eye next week’s ECB policy decision and anticipate some pickup in the central bank’s easing pace, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR traders slightly lower

“A 1/4 point cut is all but fully priced in for the 17th and another 25bps cut is more or less priced in for December. Wider short-term spreads relative to the USD are a drag on the EUR’s outlook and technical momentum is bearish.”

“Spot’s breakdown from the minor consolidation that developed around the turn of the week above 1.0950 has extended a little but the drift lower in the EUR intraday keeps the technical tone negative after last week’s sharp move lower and break below key support at 1.10 (now resistance).”

“The 100- day MA (1.0934) may provide some short-term support for the EUR but near-term risks are geared towards a push to 1.0875/80 and losses may extend to the low 1.08 area.”

The Euro (EUR) is expected to edge lower; it remains to be seen if it can break the major support at 1.0900. In the longer run, outlook for EUR remains negative; the next level to watch is 1.0900, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Next level to watch is 1.0900

24-HOUR VIEW: “We expected EUR to trade in a sideways range of 1.0950/1.1000 yesterday. However, it edged lower to 1.0936, closing at 1.0939 (- 0.37%). There has been a slight increase in momentum, and EUR is likely to continue to edge lower today. That said, it remains to be seen if it has enough momentum to break the major support at 1.0900. Resistance is at 1.0960; a breach of 1.0980 would mean that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “Our latest narrative was from Monday (07 Oct, spot at 1.0970), wherein ‘further EUR weakness appears likely.’ We pointed out ‘the next two support levels to monitor are 1.0935 and 1.0900.’ Yesterday (Wednesday), EUR dropped to a low of 1.0936. While there has been no significant increase in momentum, the outlook for EUR remains negative. The next level to watch is at 1.0900. Note that below this level lies a significant support zone between 1.0860 and 1.0885. On the upside, a breach of 1.1010 (‘strong resistance’ level previously at 1.1045) would mean that the EUR weakness from the middle of last week (see annotations in the chart below) has come to an end.”

• EUR/USD faces selling pressure as the US Dollar holds onto gains ahead of the US CPI data for September.
• Fed officials are highly concerned about reviving job growth.
• The Euro is under pressure as the ECB is expected to reduce interest rates further by 50 bps by the year-end.

EUR/USD exhibits a weak performance in Thursday’s European session after diving below the key support of 1.0950 on Wednesday. The major currency pair remains under pressure as the US Dollar (USD) clings to gains ahead of the United States (US) Consumer Price Index (CPI) data for September, which will be published at 12:30 GMT.

The US Dollar Index (DXY), which tracks the Greenbacks value against six major currencies, trades close to a fresh seven-week high near 103.00.

Economists expect the annual core CPI – which excludes volatile food and energy prices – to have grown steadily by 3.2%. Annual headline CPI is expected to have decelerated to 2.3% from 2.5% in August. The month-on-month headline and core CPI are expected to have grown at a slower pace of 0.1% and 0.2%, respectively.

The impact of the inflation data on market expectations for the Federal Reserve (Fed) interest rate outlook is expected to be moderate as recent commentaries from Fed officials have indicated that they are confident about price pressures remaining on track to return sustainably to the bank’s target of 2%. Fed policymakers are highly focused on reviving labor demand due to which they unanimously voted for a larger-than-usual rate cut size of 50 basis points (bps) in the September policy meeting.

However, the scenario of blowout inflation figures could renew risks of inflation remaining persistent and negatively influence market expectations of two more interest rates in the remaining year.

Daily digest market movers: EUR/USD weakens as ECB rate cut bets swell

• EUR/USD remains vulnerable near a fresh eight-week low of 1.0940 due to multiple headwinds. Apart from the firm US Dollar, the Euro’s (EUR) underperformance against its major peers due to escalating European Central Bank (ECB) dovish bets has also kept the shared currency pair on the backfoot.
• A majority of ECB officials have argued in favor of reducing interest rates further as risks of inflation remaining persistent in the Eurozone have significantly eased after the September flash annual Harmonized Index of Consumer Prices (HICP) report decelerated to 1.8%, the lowest since April 2021. Also, growing risks to economic growth have allowed traders to price in a 25-bps interest rate cut in each of the remaining two meetings this year.
• German economic ministry said on Wednesday that they are expecting the economy to end the year with a 0.2% decline in the overall output. Earlier, the economic ministry projected a 0.3% growth but was forced to revise forecasts due to structural problems and geopolitical issues. Being the largest nation in the Eurozone, the impact of a de-growth in the German economy would be high on the Euro.
• On the economic front, annual German Retail Sales, a key measure of consumer spending that prompts inflationary pressures, expanded at a robust pace of 2.1% in August after contracting by 1.6% in July. On month-on-month, the consumer spending measure rose at a faster pace of 1.6% from 1.5% in July.

Technical Analysis: EUR/USD trades close to fresh eight-week low below 1.0940

EUR/USD extends its downside to near 1.0935 after failing to hold the key support of 1.0950. The major currency pair weakened after it delivered a breakdown of the Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) settles inside the bearish range of 20.00-40.00, suggesting more weakness ahead.

Looking down, the pair is expected to find support near the 200-day EMA around 1.0900. On the upside, the September 11 low of 1.1000 and the 20-day EMA at 1.1090 will be major resistance zones.

• EUR/USD struggles to attract any meaningful buyers amid a bullish USD. 
• The fundamental backdrop seems tilted firmly in favor of bearish traders.
• Investors await the release of the US CPI report before placing fresh bets.

The EUR/USD pair oscillates in a narrow band below mid-1.0900s during the Asian session on Thursday and consolidates the recent heavy losses to a nearly two-month low touched the previous day. 

The US Dollar (USD) stands tall near its highest level since August 16 as traders have priced out the possibility of another 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in November. Moreover, the current market pricing indicates over a 20% chance that the US central bank will keep rates on hold next month and the expectations were reaffirmed by hawkish FOMC minutes released on Wednesday. This keeps the yield on the benchmark 10-year US government bond elevated above the 4% threshold, which should underpin the buck and act as a headwind for the EUR/USD pair. 

The shared currency, on the other hand, continues to be weighed down by growing acceptance that the European Central Bank (ECB) will lower borrowing costs by 25 bps at each of the two policy meetings by the year-end. Moreover, the risk of a further escalation of geopolitical tensions in the Middle East should benefit the safe-haven Greenback and suggest that the path of least resistance for the EUR/USD pair is to the downside. Traders, however, might refrain from placing fresh bearish bets and prefer to wait for the latest US inflation figures before positioning for a further depreciating move. 

The crucial US Consumer Price Index (CPI) is due for release later during the North American session this Thursday and will be followed by the US Producer Price Index (PPI) on Friday. The data will play a key role in influencing expectations about the Fed's rate-cut path, which, in turn, will drive the USD demand in the near term and provide a fresh directional impetus to the EUR/USD pair.

ECB VP Villeroy said the central bank will very probably lower rates at next week’s policy decision, in keeping with his and other policymakers’ comments that have made a 25bps cut all but certain (and all but priced in) for the 17th, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR off earlier low

“Wider short term yield spreads versus the US have effectively undercut the EUR in recent weeks and largely explain spot’s slide from the 1.12 highs. The EUR retains a soft undertone but a further shift in yields/spreads may be needed to drive more losses absent fresh drivers for FX (such as the US election) in the coming weeks.”

“Bearish—The minor consolidation on spot seen over the course of the week so far appears to be breaking down bearishly for the EUR, tilting risks towards more losses. While spot remains below 1.10, the breakdown trigger for the 1.12 double top pattern, broader risks are tilted towards a dip to the low 1.08s.”

The Euro (EUR) is likely to trade in a sideways range of 1.0950/1.1000. In the longer run, further EUR weakness appears likely; the next two support levels to monitor are 1.0935 and 1.0900, UOB Group Quek Ser Leang and Peter Chia note.

Next two support levels to monitor are 1.0935 and 1.0900

24-HOUR VIEW: “Yesterday, we expected EUR to ‘continue to trade sideways, expected to be in a 1.0950/1.1000 range.’ Our view of sideways trading was not wrong, even though EUR traded in a narrower range between 1.0960 and 1.0996. EUR closed largely unchanged at 1.0980 (+0.05%). Momentum indicators are most flat, and we continue to expect EUR to trade in a sideways range of 1.0950/1.1000.”

1-3 WEEKS VIEW: “Our update from two days ago (07 Oct, spot at 1.0970) still stands. As highlighted, after the sharp drop last Friday, further EUR weakness appears likely. The next two support levels to monitor are 1.0935 and 1.0900. Should EUR break above 1.1045 (no change in ‘strong resistance’ level from yesterday), it would mean that the EUR weakness a week ago has ended.”

• EUR/USD struggles to sustain above 1.0950 as the US Dollar performs strongly ahead of the FOMC Minutes.
• Traders have priced out Fed large rate cut bets for November.
• The ECB is expected to reduce interest rates by 50 bps in the last quarter of the year.

EUR/USD skates on thin ice near the eight-week low of 1.0950 in Wednesday’s European session. The major currency pair stays under pressure as the US Dollar (USD) gathers strength to extend its previous week’s rally further, with the US Dollar Index (DXY) hovering near a seven-week high around 102.60.

The appeal of the US Dollar has strengthened as traders have priced out expectations for the Federal Reserve (Fed) to reduce interest rates again by 50 basis points (bps) in November. Traders were forced to unwind Fed large rate cut bets as the upbeat United States (US) Nonfarm Payrolls (NFP) report for September diminished downside risks to economic growth and consumer spending. Also, dismal market sentiment due to Middle East tensions has improved the Greenback’s appeal as a safe haven.

Financial market participants expect the Fed to cut interest rates by 25 bps in the remaining two policy meetings this year at the time of writing, according to the CME FedWatch tool.

In Wednesday’s session, investors will pay close attention to the Federal Open Market Committee (FOMC) Minutes of the September meeting, which will be released at 18:00 GMT. The FOMC Minutes will convey the views of all officials on the interest rate and the economic outlook. In the September meeting, all members unanimously voted to start the policy-easing cycle with a 50-bps rate cut, except Fed Governor Michelle Bowman who favored a smaller reduction of 25 bps.

Going forward, the major trigger for the US Dollar will be the US Consumer Price Index (CPI) and the Producer Price Index (PPI) data for September, which will be published on Thursday and Friday, respectively. 

Daily digest market movers: EUR/USD sees more downside amid firm US Dollar

• The Euro (EUR) faces selling pressure as traders have priced in more rate cuts by the European Central Bank (ECB). The ECB is expected to cut its Deposit Facility Rate further by 50 bps to 3% by the year-end, suggesting that there will be a rate cut of 25 bps in each of the two policy meetings scheduled for next week and in December.
• The ECB has already reduced its key borrowing rates by 50 bps this year as officials have remained confident that inflation will return to the bank’s target of 2% in 2025. Market expectations for the ECB to cut interest rates further have been prompted by the declining trend in price pressures and the economic vulnerability in the Eurozone.
• ECB policymaker and Governor of the Greek Central Bank Yannis Stournaras has also backed two more rate cuts in each of the remaining meetings this year and emphasized the need to reduce them further in 2025 as inflation continues to decelerate, in his comments in an interview with Financial Times published on Wednesday. His comments also indicated that price pressures are declining faster than what the ECB forecasted in September.

Technical Analysis: EUR/USD remains below 1.1000

EUR/USD struggles to gain ground near the immediate support of 1.0950. The major currency pair stays on the backfoot as it has delivered a breakdown of the Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) settles inside the bearish range of 20.00-40.00, suggesting more weakness ahead for EUR/USD.

Looking down, the pair is expected to find support near the 200-day EMA around 1.0900. On the upside, the 20-day EMA at 1.1090 and the September high around 1.1200 will be major resistance zones.

• EUR/USD held off further losses, but gains remain absent.
• Fed Meeting Minutes due on Wednesday to draw investor attention.
• Traders will be looking for good news on Thursday’s US CPI inflation update.

EUR/USD held steady on Tuesday, failing to recapture the 1.1000 handle but arresting Fiber’s recent backslide from the 1.1200 region. The Euro has shed two and a third of a percent against the US Dollar since reaching a one-year peak in late September, tumbling back into the 1.0950 region as markets bid the Greenback higher across the board.

European data remains on the tepid side for most of the trading week. The European Central Bank (ECB) is set for another rate call next week, leaving the economic calendar largely clear of pan-EU data until then.

The Federal Reserve’s (Fed) latest Meeting Minutes from the September rate cut meeting will be released on Wednesday, giving Greenback traders plenty to chew on. Markets widely hoped for a follow-up double rate cut in November after the Fed blew the doors open with a jumbo 50 bps rate trim in September. However, core inflation still holding above Fed target levels and US labor figures that wildly outran expectations last week have firmly depressed rate cut hopefuls. 

According to the CME’s FedWatch Tool, rate markets see nearly 90% odds that the Fed will follow up September’s jumbo 50 bps rate cut with a more modest 25 bps on November 7. Fed officials widely telegraphed that a weakening in the US labor market would be required to push the Federal Reserve into further outsized rate trims.

In addition, another round of US inflation figures is due on Thursday, with the release of September’s US Consumer Price Index (CPI). Core US CPI is expected to ease to 0.2% MoM from the previous 0.3%, while annualized headline CPI inflation is forecast to tick down to 2.3% YoY from the previous 2.5%.

EUR/USD price forecast

Fiber looks set to enter a bit of a sideways grind as daily candlesticks set up a consolidation pattern. The pair is trading in the dead zone between the 50-day and 200-day Exponential Moving Averages (EMA), but buyers are struggling to rebound after EUR/USD’s belly flop from north of the 1.1200 handle.

As long as sellers have run out of momentum, Euro bulls won’t have anything to fear from the 200-day EMA near 1.0900, while an extended bearish slide will send Fiber clattering back into 2024 lows near 1.0600.

EUR/USD daily chart

• EUR/USD has broken below a key trendline and might have formed a bearish pattern. 
• A Double Top reversal pattern could potentially be a bad omen for the pair. 
   

EUR/USD breaks below the trendline for the rally since June. On Tuesday it executes a throwback move to “air kiss the trendline goodbye” and now seems to be declining again.

The overall tenor of the chart suggests a bearish short-term outlook. Momentum as measured by the Moving Average Convergence Divergence (MACD) is in negative territory. If prices can close below Friday’s low at 1.0951 the break will be confirmed and a deeper decline is likely to unfold. 

EUR/USD Daily Chart 

A confirmed break of the trendline would likely lead to a deeper sell-off. Such a move might reach a target at 1.0865 initially (the 61.8% Fibonacci (Fib) extrapolation of the move prior to the trendline break). The 200-day Simple Moving Average (SMA), however, could come in with support a little before then at 1.0875, suggesting another more conservative option. 

Adding to the bearish picture is the possible Double Top price pattern which might have formed during September. This is the “M” shaped pattern formed  just under the heavy resistance line at 1.1226. Double Tops are signals that the uptrend has reached its conclusion and price is reversing. The pattern's "neckline" at 1.1001 has already been broken, confirming activation of the pattern’s downside target at 1.0858, the 61.8% Fib extrapolation of the height of the pattern lower. 

The Euro (EUR) has nudged higher to near 1.10 this morning despite signs that even relative hawks on the ECB governing council may not oppose a rate cut late this month, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR to retest 1.10 breakdown point

“While ECB Governor Holzmann commented yesterday that the fight against inflation was not over, Nagel said earlier today that he is open to discussing a cut this month. Swaps are pricing in 24bps of easing risk for the 17th. A dovish-leaning ECB should help curb the EUR rebound around the 1.10 zone.”

“Spot has rebounded to retest last week’s technical breakdown point at 1.10—the low between the August and September tests of 1.12 and the effective double top trigger point. This should be firm resistance if the pattern is to deliver on its technical—measured move—promise of driving EUR/USD back to the low 1.08s in the next few weeks.”

• EUR/USD recovers mildly while the US Dollar’s rally stalls as the US CPI comes under the spotlight.
• The Fed is expected to cut interest rates by 25 bps in November.
• A majority of ECB policymakers are open to more rate cuts.

EUR/USD rises to near the psychological resistance of 1.1000 in Tuesday’s European session. The major currency pair recovers mildly as the US Dollar (USD) faces a slight correction, with investors shifting focus to the United States (US) Consumer Price Index (CPI) data for September, which will be published on Thursday.

The inflation data is expected to show that the annual core CPI – which excludes volatile food and energy prices – has grown at a steady pace of 3.2% year-over-year (YoY). The headline inflation is estimated to have decelerated to 2.3% YoY from 2.5% in August.

The impact of the inflation data is expected to be lower on the Federal Reserve’s (Fed) interest rate outlook as policymakers are more focused on reviving economic growth and consumer spending. The comments from Fed Governor Adriana Kugler in Tuesday’s European session suggested that the policymaker sees more rate cuts as appropriate if price pressures continue to decline as expected.

Meanwhile, financial market participants expect the Fed to cut interest rates again in November, but the rate-cut size is expected to be 25 basis points (bps), according to the CME FedWatch tool. Lately, market speculation for a Fed 50 bps rate cut waned after the US job report for September, which showed that labor demand remained robust and wage growth was stronger than expected.

Daily digest market movers: EUR/USD rises slightly despite ECB Nagel is open for more rate cuts

• EUR/USD edges higher amid a mild correction in the US Dollar. The outlook of the Euro (EUR) remains fragile as a majority of European Central Bank (ECB) officials continue to emphasize the need to reduce interest rates further due to a sharp deceleration in Eurozone price pressures and poor economic growth.
• In an interview with Table Media, ECB policymaker and Bundesbank President Joachim Nagel said, "I am certainly open to considering whether we could possibly make another interest rate cut.” Nagel has also agreed with the revision of the Eurozone’s Gross Domestic Product (GDP) forecast for 2024 to a 0.2% contraction against a prior projection of 0.3% growth.
• However, the German Industrial Production for August has come in better than expected. On a monthly basis, Industrial Production grew at a robust pace of 2.9%, compared to estimates of 0.8% after contracting by 2.4% in July.
• Meanwhile, ECB policymaker and Austrian central bank Governor Robert Holzmann advised to proceed with caution on further interest rate cuts as inflation has yet not been defeated, in his comments while interviewing with Sueddeutsche Zeitung published on Monday. In September, the Eurozone flash Harmonized Index of Consumer Prices (HICP) decelerated to 1.8% year-on-year.

Technical Analysis: EUR/USD remains below 1.1000

EUR/USD gathers strength to gain ground near the immediate support of 1.0950. The major currency pair is broadly under pressure as it has delivered a breakdown of a Double Top chart pattern formation on a daily timeframe. The above-mentioned chart pattern was triggered after the shared currency pair broke below the September 11 low of 1.1000.

The 14-day Relative Strength Index (RSI) slides below 40.00. A bearish momentum would trigger if the RSI sustains below the same.

Looking down, the pair is expected to find support near the 200-day Exponential Moving Average (EMA) around 1.0900. On the upside, the 20-day EMA at 1.1070 and the September high around 1.1200 will be major resistance zones.

The Euro (EUR) is likely to trade in a sideways range of 1.0950/1.1000. In the longer run, further EUR weakness appears likely; the next two support levels to monitor are 1.0935 and 1.0900, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Levels to monitor are 1.0935 and 1.0900

24-HOUR VIEW: “After EUR fell sharply last Friday, we indicated yesterday that ‘provided that 1.1015 is not breached, the weakness in EUR could extend to 1.0935 before stabilisation can be expected.’ Our view did not turn out, as EUR traded sideways between 1.0954 and 1.0986, closing little changed at 1.0974 (-0.02%). There is no increase in either downward or upward momentum, and EUR is likely to continue to trade sideways. Expected range for today: 1.0950/1.1000.”

1-3 WEEKS VIEW: “Our update from yesterday (07 Oct, spot at 1.0970) still stands. As highlighted, after the sharp drop last Friday, further EUR weakness appears likely. The next two support levels to monitor are 1.0935 and 1.0900. Should EUR break above 1.1045 (‘strong resistance’ level was at 1.1060 yesterday), it would mean that the EUR weakness from the middle of last week has ended.”