CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD lost another sixth of a percent on Tuesday, dipping below 1.0800.
• ECB Lagarde’s middling comments did little to support Fiber bids.
• EU and US PMI set to clash on Thursday.

EUR/USD found further room on the low side on Tuesday, easing back another 0.16% and testing into a key technical barrier that could see fresh 16-week lows if the price floor opens up beneath the Euro.

European Central Bank (ECB) President Christine Lagarde made a handful of appearances on Tuesday, but talking points that ranged from pedestrian to unremarkable did little to support the Fiber. ECB head Lagarde noted that the ECB “is not unhappy with what it has seen”, adding in that the ECB “can’t jump to conclusion that inflation target is a done deal”, inspiring absolutely nobody in particular and delivering little of note in the way of forward guidance to currency markets that see the Euro on pace to backslide against the Greenback for a fourth consecutive week.

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.

EUR/USD price forecast

The EUR/USD pair continues to exhibit bearish momentum as it remains under pressure, trading near 1.0800. The pair has been consistently declining since mid-September, breaking below key support levels and now testing the 1.0800 mark. The 50-day exponential moving average (EMA) is positioned at 1.0983, while the 200-day EMA lies slightly higher at 1.0909. The fact that the price is trading well below both EMAs confirms that the short- to medium-term trend remains bearish. As long as the pair stays below these levels, the downside remains favored, with 1.0750 acting as the next major support area.

From a momentum perspective, the MACD indicator shows a strong bearish signal, with the MACD line extending further below the signal line. The histogram remains in negative territory, suggesting that the current downtrend may persist in the short term. A break below the 1.0800 psychological level could accelerate further declines toward the next support around 1.0750, while a recovery would need to break above the 1.0900 handle to signal a potential reversal.

EUR/USD daily chart

• EUR/USD falls as climbing US Treasury yields and risk-off sentiment bolster the US Dollar.
• ECB members hint at potential rate cuts, with President Lagarde maintaining a cautious stance on inflation, targeting 2025 for stability.
• US Dollar Index (DXY) rises to 104.06 as US 10-year Treasury yields remain elevated at 4.20%.

The EUR/USD fell below 1.0800 on Tuesday, late during the North American session, as US Treasury yields climbed. Risk aversion linked to US elections and comments from European Central Bank (ECB) Council members pushed the pair toward new two-month lows at 1.0795.

The Euro hits two-month lows at 1.0795 as risk aversion grows amid US election uncertainty and dovish ECB remarks

Market mood remains fragile as Wall Street trimmed some losses, yet it remains trading in the red. A scarce economic docket in both sides of the Atlantic, keeps central bankers entertaining traders, along with US elections.

ECB’s Mario Centeno was dovish, opening the door for 50 or 25 basis points (bps) of easing, depending on upcoming data. ECB’s President Christine Lagarde said that “disinflation is on the right track” and added that the target would be reached sometime in 2025. She pushed back and said that rates will remain restrictive as long as needed.

Furthermore, ECB’s Francois Villeroy stated there’s no reason to keep rates restrictive in 2025, while ECB’s Rehn said that the growth outlook has weakened, which could increase disinflationary pressures.

On the US front, the US 10-year T-note yield climbs one bps to 4.20%, a tailwind for Greenback. In the meantime, the US Dollar Index (DXY), which tracks the buck’s performance against other six peers, is up 0.10% at 104.06.

Meanwhile, a Reuters/Ipsos poll finds Harris holds a 46%-43% lead over Trump amid voter gloom.

EUR/USD Price Forecast: Technical outlook

Four days ago, the EUR/USD dropped below the 200-day moving average (DMA) at 1.0870, turning bearish. Momentum shows that the downtrend is accelerating, with the Relative Strength Index (RSI) turning oversold. Despite this, the RSI is considered “extremely” oversold beneath 20 due to the trend's strength.

The EUR/USD next support would be the August 1 low at 1.0777 before extending its losses to 1.0666, the June 26 low.

EUR/USD trade has been a little choppy, within a limited range, so far on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR trades in tight, choppy range

“There were no data reports of note from the Eurozone this morning and there were no major comments from ECB policymakers. Spot chop may reflect a battle between bargain hunter interest around the 1.08 area and the drag on the EUR from wider short-term spreads (EZ/US 2y spread to –186bps today). Note that ECB President Largarde is speaking with Bloomberg at 10ET.”

“The EUR remains oversold but the charts continue to reflect softness, with spot holding near the base of the recent consolidation range. The EUR has completed the measured move lower I thought would result from the break under 1.10 around the turn of the month but a rebound—above 1.0875—is needed to signals scope for even short-term gains from here. Support is 1.0780/00.”

Potential for the Euro (EUR) to decline further; it remains to be seen whether 1.0770 is within reach today. In the longer run, downward momentum has not improved much, but there is a chance for EUR to drop to 1.0770 before stabilisation can be expected, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

EUR can stabilize after dropping towards 1.0770

24-HOUR VIEW: “Yesterday, when EUR was at 1.0865, we indicated that it ‘could edge higher, but it does not seem to have enough momentum to break above 1.0900.’ However, instead of edging higher, EUR plummeted, closing lower by 0.47% (1.0815). While downward momentum has not increased by much, there is potential for EUR to decline further. However, it remains to be seen whether 1.0770 is within reach today. Note that there is another support level at 1.0800. On the upside, resistance levels are at 1.0830 and 1.0850.”

1-3 WEEKS VIEW: “After EUR rebounded last Friday, we indicated yesterday (21 Oct, spot at 1.0865) that ‘although our ‘strong resistance’ level at 1.0900 has not been breached yet, the slowing momentum suggests 1.0770 is likely out of reach this time around.’ EUR subsequently reversed and dropped to 1.0810. Despite the relatively sharp decline, downward momentum has not improved much. That said, as long as 1.0880 (‘strong resistance’ level previously at 1.0900) is not breached, there is a chance for EUR to drop to 1.0775 before stabilisation can be expected.”

• EUR/USD remains inside the woods as the ECB is expected to cut interest rates again in December.
• ECB’s Lagarde will provide fresh cues on the interest rate outlook on Tuesday.
• Fed policymakers see smaller interest rate cuts as appropriate.

EUR/USD trades close to a fresh 11-week low near the round-level support of 1.0800 in Tuesday’s European session. The major currency pair is under pressure due to multiple headwinds, such as escalating European Central Bank (ECB) dovish bets and a firm US Dollar (USD).

Traders have priced in the ECB to cut interest rates again in the December meeting as growing risks to Eurozone’s economic growth are expected to keep inflationary pressures within striking distance of the central bank’s target of 2%. This would mean the fourth interest rate cut by the ECB this year.

Data released on Monday showed that the German Producer Price Index (PPI) deflated by 1.4% year-over-year (YoY) in September, faster than 0.8% in August, and pointed to the inability of producers to raise prices of goods and services at factory gates due to weak household spending.

On Monday, Slovak central bank chief and ECB policymaker Peter Kazimir said he is increasingly confident that the disinflation trend is intact. However, he wants to see more evidence before declaring a victory over inflation. 

Meanwhile, the commentary from Lithuanian central bank governor and ECB Governing Council member Gediminas Šimkus appeared to be more dovish. Šimkus said, "If the disinflation processes get entrenched, it's possible that rates will be lower than the natural level." The ‘natural level’ of interest rates is between 2% and 3%.

In Tuesday’s session, investors will pay close attention to ECB President Christine Lagarde’s interview with Bloomberg and her participation in a panel discussion during the International Monetary Fund (IMF) meeting in Washington. Lagarde is expected to provide fresh guidance on interest rates.

Daily digest market movers: EUR/USD stays on backfoot on US election jitters

• EUR/USD remains fragile near the immediate support of 1.0800 as the US Dollar (USD) clings to gains near a fresh 11-week high. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, holds onto gains near 104.00. The Greenback gains on United States (US) presidential election jitters and growing expectations that the Federal Reserve (Fed) will follow a moderate policy-easing cycle.
• Latest polls have shown a neck-to-neck competition between former US President Donald Trump and Vice President Kamala Harrish ahead of elections, which are just two weeks away. Trump's victory is expected to result in higher import tariffs and lower taxes, which could prompt the Fed to raise interest rates further. 
• Meanwhile, the Fed is expected to cut interest rates by 25 basis points (bps) in November and December, according to the CME FedWatch tool. The reasoning behind firm speculation for a slower rate-cut cycle is investors’ growing confidence in US economic resilience after upbeat Nonfarm Payrolls (NFP), ISM Services PMI, and the Retail Sales data for September. Also, Fed officials see a gradual rate-cut path as appropriate.
• This week, investors will keep an eye on the preliminary S&P Global Purchasing Managers Index (PMI) data for October, which will be published on Thursday.

Technical Analysis: EUR/USD remains below 1.0850

EUR/USD struggles to hold the immediate support of 1.0800 in European trading hours. The outlook of the major currency pair remains uncertain as it trades 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 a daily timeframe near the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) 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 find support near the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA and the psychological figure of 1.1000 will be the key resistances for the pair.

• EUR/USD is seen consolidating the overnight fall to its lowest level since early August.
• Bets for more interest rate cuts by the ECB undermine the Euro amid a bullish USD.
• Expectations for smaller Fed rate cuts and elevated US bond yields benefit the buck.

The EUR/USD pair enters a bearish consolidation phase during the Asian session on Tuesday and oscillates in a range around the 1.0820 region, just above its lowest level since early August touched the previous day. The near-term bias, meanwhile, seems tilted firmly in favor of bearish traders and suggests that the path of least resistance for spot prices remains to the downside.

Data released on Monday showed that producer prices in Germany – the Eurozone's largest economy – fell for the first time in seven months in September and the annual rate of deflation picked up pace. This, in turn, lifted bets for further monetary easing by the European Central Bank (ECB). Furthermore, ECB policymaker Gediminas Simkus said that the ECB may need to reduce its key interest rate even further below the "natural" level if a fall in inflation becomes entrenched. This might continue to undermine the shared currency, which, along with a bullish US Dollar (USD), validates the negative outlook for the EUR/USD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near its highest level since early August amid growing acceptance that the Federal Reserve (Fed) will proceed with modest interest rate cuts. Apart from this, concerns about the potential for rising deficit spending after the November 5 US presidential election pushed the US Treasury bond yields to their highest levels in almost three months. This, along with persistent geopolitical risks, is seen underpinning the safe-haven buck, which, in turn, supports prospects for a further near-term depreciating move for the EUR/USD pair. 

There isn't any relevant market-moving macro data due for release from the Eurozone on Tuesday, while the US economic docket features the Richmond Manufacturing Index. This, along with Philadelphia Fed President Patrick Harker's scheduled speech, might influence the USD price dynamics and provide some impetus to the EUR/USD pair. Nevertheless, the aforementioned fundamental backdrop suggests that any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

• EUR/USD shed nearly half of a percent to open another trading week.
• Markets pivoted back into the Greenback on renewed skepticism on the pace of rate cuts.
• Heavy appearances from central bank member due throughout the week.

EUR/USD fumbled on Monday, kicking off a new trading week with a downside push as price action waffled back into familiar 12-week lows just above the 1.0800 handle. Markets remain apprehensive on the future pace of rate cuts, specifically from the Federal Reserve (Fed), and Purchasing Managers Index (PMI) activity figures due later in the week will give investors a glimpse at the shape of the global economy in the coming weeks.

European Central Bank (ECB) President Christine Lagarde is slated to make several appearances this week. The ECB head’s key public outing will be on Wednesday when ECB President Lagarde will speak on Europe’s current financial challenges at the Atlantic Council in Washington DC.

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.

EUR/USD price forecast

The EUR/USD pair continues to trade with a bearish bias, currently hovering around 1.0815 after a decisive break below both the 50-day EMA at 1.0990 and the 200-day EMA at 1.0902. The price action confirms that the bears remain firmly in control as the pair consolidates near its recent lows. The inability to regain ground above the 200-day EMA indicates that downside momentum is likely to persist. Immediate support rests at 1.0800, with further declines possibly targeting the 1.0700 region if bearish pressure intensifies.

The MACD indicator further reinforces the bearish outlook, with both the MACD line and signal line in negative territory, and the histogram expanding to the downside. This signals increasing bearish momentum, which suggests that any attempts by the bulls to recover could face strong resistance. A sustained move above 1.0900 is required to shift the bias back to neutral, but without a clear bullish catalyst, the path of least resistance remains to the downside in the near term.

EUR/USD daily chart

• EUR/USD edged back into the low end on Monday as the US Dollar bounces.
• A strong Greenback bid is bolstering the USD across the board.
• Easing equity prices and a simmering Middle East are boosting safe haven bids.

EUR/USD pivoted into early losses to kick off the new trading week, cutting a near-term recovery rally short and sending intraday bids tumbling back toward 1.0800. The US market session sees stock investors taking a breather from setting record highs multiple days in a row, and the downside push in equities is helping to send the US Dollar higher.

Middle East geopolitical tensions continue to simmer away in the background, giving the safe haven Greenback a boost and lending a leg higher to both Gold and Crude Oil prices. Market participants continue to wait and see if the US will successfully negotiate Israel into a ceasefire as the small country continues to wage war against Hezbollah and Hamas, showing a willingness to cross into other countries’ borders to do it.

Federal Reserve (Fed) Bank of Dallas President Lorie Logan hit most of the common narrative elements markets have received from Fed policy planners in recent weeks, however the Dallas Fed President made a point of noting that money markets are “cose to or just above interest on reserve rates”. Dallas Fed President Logan then proceeded to highlight the risks to the US labor market and the Fed’s dedication to maintaining a healthy employment rate, underlining the fact that the Fed will need not just a decline in inflation, but a significant uptick in the unemployment rate before markets would see accelerated rate cuts.

Dovish comments from ECB Governors Simkus and Kazaks support market expectations for a further reduction in ECB rates in December, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR capped by 200-day MA in upper 1.08s

“But there is little appetite for large reductions in rates, comments suggest, which perhaps means markets expectations are a little stretched (32bps priced in for December at this point). EUR/USD is likely to remain under pressure in the short run but bargain hunters may become a bit more active around 1.08.”

“A decent rebound in the EUR late last week does not appear to signal a reversal in the EUR’s recent slide. The sell-off is looking over-extended on the intraday and daily oscillators but a firm cap appears to have been set on spot rebounds at 1.0872, where the 200-day MA sits currently.”

“Minor gains from Thursday’s low appear corrective ahead of renewed losses. Support is firm at 1.0780/00. Weakness below there targets 1.0650/00.”

Will the markets can see higher EUR/USD levels again in the coming weeks? These questions are hardly surprising, given the weeks-long slide in EUR/USD that has taken the markets from 1.12 at the end of September to below 1.09. Moreover, as the end of the year approaches, this is a vital question for anyone who wants or needs to hedge, Commerzbank’s FX analysts Michael Pfister notes.

EUR/USD is likely to stabilise around current levels

“Looking at these data, it is not surprising that the movement since the end of September has been clearly driven by the US dollar, which has appreciated significantly since then. Perhaps more surprising is the fact that the euro has actually appreciated slightly against the G10 average over the same period, although this is not comparable to the huge appreciation of the US dollar. This means that in order to see significantly higher EUR/USD levels, we would probably need to see an end to the USD rally.”

“It is likely that the strong increase in jobs at the beginning of October will be revised downwards and, if our economists are right, the Fed will also make another rate cut. This should take some of the wind out of the dollar's sails. But it will be a few weeks before that happens. In addition, Donald Trump's chances of becoming US President again have increased recently. His economic proposals have the potential to trigger a strong USD rally, which could overshadow the labor market and the interest rate decision.”

“This does not mean that we will not see higher EUR/USD levels in the coming weeks. On Friday we saw already a small recovery. However, the risks are still clearly on the downside, which means that EUR/USD is likely to stabilise around current levels. At least until the US employment report comes in weaker and sends shockwaves through the market again.”

The Euro (EUR) could edge higher; it does not seem to have enough momentum to break above 1.0900. In the longer run, slowing momentum suggests 1.0770 is likely out of reach this time around, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

To trade in range after breaking above of 1.0900

24-HOUR VIEW: “After EUR fell sharply last Thursday, we indicated on Friday that ‘conditions are severely oversold after the rapid drop, but today, EUR could test the 1.0800 level before a recovery can be expected.’ However, instead of testing 1.0800, EUR recovered from a low of 1.0823, closing higher by 0.32% at 1.0866. The recovery has gathered some momentum. Today, EUR is likely to edge higher, but it does not seem to have enough momentum to break above 1.0900 (there’s a minor resistance at 1.0885). Support is at 1.0850; a breach of 1.0835 would indicate that the current mild upward pressure has eased.”

1-3 WEEKS VIEW: “Last Thursday (17 Oct, spot t 1.0860), we highlighted that ‘the weakness in EUR that started early this month remains intact.’ We added, ‘To reach the significant support at 1.0770, EUR must keep moving lower, or the likelihood of it reaching this level will diminish quickly.’ EUR subsequently dropped to 1.0810. Last Friday, it rebounded and reached a high of 1.0869. Although our ‘strong resistance’ level at 1.0900 has not been breached yet, the slowing momentum suggests 1.0770 is likely out of reach this time around. Looking ahead, a breach of 1.0900 would indicate the start of a range trading phase.”

• EUR/USD holds 1.0800, though its outlook remains uncertain on ECB dovish bets.
• The Eurozone's economic growth is expected to remain modest.
• The US Dollar will be influenced by market expectations for US presidential elections.

EUR/USD struggles to extend Friday’s recovery above the immediate resistance of 1.0870 and retraces back to 1.0850 in Monday’s European session. The major currency pair could retreat to its 11-week low near 1.0800 set on Thursday as investors expect the European Central Bank (ECB) to continue easing interest rates further.

With faltering Eurozone economic growth and the inflationary pressures below the bank’s target of 2%, investors expect the ECB to cut its borrowing rates again in December. 

ECB policymaker and Estonian central bank Governor Madis Müller argued on Friday that the expectations of modest economic growth would probably tame price pressures further. The confidence of market participants for inflation remaining contained strengthened after the ECB’s own Survey of Professional Forecasters downwardly revised price growth to 1.9% for next year from 2% anticipated a quarter ago.

For more clarity on the interest rate outlook, investors will pay close attention to the two-day ECB President Christine Lagarde’s speech, starting on Tuesday. In her press conference after the central bank’s 25 basis points (bps) rate cut decision on Thursday, Lagarde didn’t offer a specific interest rate path and said decisions would be based on the incoming data.

Daily digest market movers: EUR/USD could resume its downside journey on US Dollar’s upbeat outlook

• EUR/USD will likely resume its downside journey as the US Dollar (USD) is expected to extend its upside after a minor technical correction on Friday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posted a fresh 11-week high last week near 104.00 on multiple tailwinds.
• The outlook of the Greenback remains firm as traders are confident that the Federal Reserve (Fed) will pursue a gradual interest rate cut path. According to the CME FedWatch tool, 30-day Federal Funds futures pricing data shows that the market expects 50 basis points (bps) decline in interest rates in the remaining year, suggesting that the Fed will cut its borrowing rates by 25 bps in November and December.
• Market expectations for the Fed opting for a less aggressive policy-easing cycle strengthened after a slew of United States (US) economic data for September pointed to economic resilience. For more cues on the economic outlook, investors will keep an eye on the preliminary S&P Global Purchasing Managers’ Index (PMI) data for October, which will be published on Thursday.
• Meanwhile, the fate of the US Dollar could be highly volatile as US presidential elections are around the corner. The latest national polls have shown Democratic candidate and US Vice President Kamala Harrish has the upper hand over Republican nominee and former US President Donald Trump.

Technical Analysis: EUR/USD strives to hold 1.0800

EUR/USD holds the immediate support of 1.0800 in European trading hours. However, the outlook of the major currency pair remains uncertain as it trades 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 a daily timeframe below the September 11 low at around 1.1000, which resulted in a bearish reversal.

The 14-day Relative Strength Index (RSI) 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 find support near the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA and the psychological figure of 1.1000 will be the key resistance for the pair.

• EUR/USD could return to the descending channel as a bearish bias is active.
• The pair could approach the "throwback support" near the psychological level of 1.0800.
• The nine-day EMA at 1.0897 appears as the immediate barrier.

EUR/USD inches lower to near 1.0860 during the Asian session on Monday. A review of the daily chart shows that the pair has breached the descending channel pattern. If it re-enters the channel, it could reinforce a bearish bias for the pair.

Additionally, 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, if the EUR/USD pair re-enters the descending channel, it could approach the "throwback support" near the psychological level of 1.0800. A break below this key level could increase selling pressure, pushing the pair toward testing the lower boundary of the descending channel around the 1.0770 mark.

In terms of resistance, the EUR/GBP pair may encounter an immediate hurdle around the nine-day Exponential Moving Average (EMA) at 1.0897, which is aligned with the psychological level of 1.0900. A break above this resistance could pave the way for the pair to explore the region around the major level of 1.1000.

EUR/USD: Daily Chart

• EUR/USD may face challenges due to market perception changes regarding central banks’ policy outlooks.
• The US Dollar gained ground due to the fading likelihood of an aggressive rate cut by the Fed in November.
• The ECB may accelerate its pace of policy easing to bolster growth in the Eurozone.

EUR/USD remains steady after gains in the previous session, hovering around 1.0860 during Monday's Asian trading hours. A potential downside looms as speculation about a 50-basis-point rate cut by the Federal Reserve (Fed) in November has been dispelled by recent data showing the US economy's resilience.

According to the CME FedWatch Tool, the probability of a 25-basis-point rate cut in November has risen to 99.3%, up from 89.5% a week earlier. US Retail Sales rose by 0.4% month-over-month in September, surpassing the 0.1% gain recorded in August and market expectations of a 0.3% increase. Additionally, US Initial Jobless Claims fell by 19,000 during the week ending October 11, the largest decline in three months. The total number of claims dropped to 241,000, significantly below the anticipated 260,000.

Rabobank's research suggests that the market is interpreting recent comments from European Central Bank (ECB) officials as an indication that they are increasingly comfortable with the Eurozone's inflation outlook. As a result, the ECB seems to be shifting its focus toward supporting regional growth. This has fueled speculation about a possible faster pace of ECB easing, including the potential for a larger 50-basis-point interest rate cut. Such a move could weigh on the Euro and exert downward pressure on the EUR/USD pair.

The Euro faced downward pressure following the European Central Bank's (ECB) decision to cut its interest rates by 25 basis points last week. The move is in response to a significant drop in inflation, which had surged to a high of 10.6% in October 2022 but has since fallen to 1.7% in September, now below the ECB's 2% target.

• EUR/USD rebounded on Friday, clipping a week-long losing streak.
• A last-second recovery in Fiber bids came from broad-market Greenback weakness.
• The Euro remains poised for further losses after another rate cut from the ECB this week.

EUR/USD drifted into a rebound on Friday, snapping a four-day losing streak. A wider selloff in Greenback flows off the back of a broad-market recovery in risk appetite was the primary driver in Fiber gains to wrap up the trading week, rather than any intrinsic boosts in Euro markets.

A midweek rate cut from the European Central Bank (ECB) gave markets little reason to prop up the Euro in the near-term, and Fiber bulls will be forced to sit on their hands and wait until next Thursday’s pan-EU Purchasing Managers Index (PMI) figures before getting a chance to exercise their buy buttons meaningfully.

US housing and construction figures came in moderately mixed on Friday, further entrenching investors in a buying mood and further crushing any fears of an economic slowdown right around the corner. The US’ “soft landing” scenario appears to have been fully averted with growth and activity metrics easily beating expectations, and upbeat Retail Sales figures releases earlier this week further make the case.

EUR/USD price forecast

EUR/USD has staged a modest rebound after testing lows near the 1.0850 level, with the pair currently trading around 1.0867. However, the broader bearish structure remains intact as long as the pair stays below the 200-day Exponential Moving Average (EMA), which is situated at 1.0899, and the 50-day EMA at 1.0997. The recent bounce could see further upside, but the bears are likely to defend the 1.0900 area vigorously. A rejection at this level would reaffirm the downtrend, potentially pushing the pair back towards the 1.0800 psychological support.

The Moving Average Convergence Divergence (MACD) indicator continues to point to downside pressure, with both the MACD and signal lines in negative territory. Despite the recent uptick in price, the histogram remains bearish, suggesting the current recovery might be limited. A break above the 200-day EMA at 1.0899 would be necessary to signal a meaningful shift in momentum, targeting the 1.0950 and 1.1000 resistance levels. However, failure to break through this barrier could result in renewed selling pressure, with the next significant support seen around 1.0800.

EUR/USD daily chart

There has been a notable change in market perceptions regarding the pace and quantity of potential Fed and ECB rate cuts in recent weeks, Rabobank’s FX analyst Jane Foley notes.

Latest developments underpin downside risks for EUR/USD

“Speculation that the Fed could follow September’s 50 bps rate cut with another similarly sized move has been blown away by a round of data pointing to a resilient US economy. Instead, talk has emerged that the FOMC might be minded to cut rates only once more before the end of the year.”

“By contrast, the market is interpreting remarks from some ECB officials as signalling that they are now relatively comfortable with the Eurozone’s inflation outlook and are instead turning their attention towards the need to support growth in the region. The result has been heightened speculation about a potential quicker pace of ECB easing or even the deployment of a larger 50 bps interest rate cut.”

“The resultant downward pressure on EUR/USD has been compounded by a renewed interest in the dollar supportive ‘Trump trade’. We recently revised down our forecasts for EUR/USD and latest developments underpin downside risks for the currency pair.”

The Euro (EUR) has recovered somewhat from the low reached in the wake of yesterday’s ECB rate cut. But EZ/US spreads remain wide, with markets pricing in more easing from the ECB before year end (the 2Y spread has dropped to –187bps, the widest since early July) , Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR steadies after ECB rate cut

“ECB Governor Villeroy commented earlier that the ECB should continue to ease policy ‘as appropriate’ but would maintain ‘total optionality’ at forthcoming meetings.”

“Spot is consolidating the October run lower that has largely delivered on the bearish promise of the break under 1.10 (recall that the break under 1.10 support at the start of the month triggered the 1.12 double top pattern which targeted a drop to the 1.08 area).”

“The EUR sell-off looks stretched and may see a little more relief in the short run if spot can push above minor trend resistance at 1.0850 in the next day or so. Firmer resistance sits at 1.0900/10. Support is 1.0800.”

The Euro (EUR) could test the 1.0800 level before a recovery can be expected; major support at 1.0770 is not expected to come into view. In the longer run, to reach the significant support at 1.0770, EUR must keep moving lower, or the likelihood of it reaching this level will diminish quickly, UOB Group’s FX analysts Quek Ser Leang and Peter Chia notes.  

Below 1.0800 EUR must reach 1.0770

24-HOUR VIEW: “We expected EUR to ‘decline gradually, potentially reaching 1.0825’ yesterday. Instead of declining gradually, EUR fell sharply in London trading, reaching a low of 1.0810. Conditions are severely oversold after the rapid drop, but today, EUR could test the 1.0800 level before a recovery can be expected. The major support at 1.0770 is not expected to come into view. Resistance levels are at 1.0845 and 1.0870.”

1-3 WEEKS VIEW: “We continue to hold the same view as yesterday (17 Oct, spot t 1.0860). As highlighted, the weakness in EUR that started early this month remains intact. However, to reach the significant support at 1.0770, EUR must keep moving lower, or the likelihood of it reaching this level will diminish quickly. The subsequent drop to 1.0810 increases the odds of a decline to 1.0770. On the upside, a breach of 1.0900 (‘strong resistance’ level was at 1.0935 yesterday) would mean that the weakness has stabilised.”

• EUR/USD recovers mildly while its outlook remains uncertain as the ECB is expected to extend its policy-easing cycle.
• A victory of Donald Trump in the US presidential elections would significantly impact the Eurozone economy.
• Investors expect the Fed to follow the rate-cut path gradually.

EUR/USD recovers mildly on Friday after posting a fresh 10-week low near 1.0800 on Thursday. The outlook of the major currency pair remains bearish as the Euro (EUR) could face selling pressures on expectations that more interest rate cuts from the European Central Bank (ECB) are in the pipeline. 

The ECB reduced its Rate on Deposit Facility by 25 basis points (bps) to 3.25% on Thursday. This was the second straight interest rate cut by the ECB and the third of this year. The central bank was widely anticipated to reduce interest rates further as recent commentaries from various ECB officials suggested that they are more concerned about reviving economic growth, with high confidence over inflation remaining under control.

In the press conference after the interest rate decision, ECB President Christine Lagarde did not offer any cues for likely interest rate action in December but was confident that the disinflation process is well on track. However, traders have priced in an additional 25-bps interest rate cut at the last meeting of this year.

When asked about the likely threats to the Eurozone economy from a victory of former US President Donald Trump in the presidential elections, Lagarde said, “Any trade obstacles were a ‘downside’ for Europe,” Reuters reported. She added, "Any restriction, any uncertainty, any obstacles to trade matter for an economy like the European economy, which is very open," adding that the ECB was also "very attentive" to possible oil price moves linked to the Middle East conflict.

Daily digest market movers: EUR/USD strives to end its losing spree

• EUR/USD takes a breather on Friday after a four-day losing streak. The shared currency pair strives to hold its feet as the US Dollar (USD) rally appears to have paused. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, struggles to extend its upside above the immediate resistance of 103.90.
• The Greenback takes a time out, while its outlook remains firm as Thursday’s upbeat United States (US) data pointed to economic resilience. The US Retail Sales data, a key measure of consumer spending, rose at a faster-than-expected pace of 0.4% in September. Also, Initial Jobless Claims for the week ending October 11 came in lower at 241K than estimates of 260K.
• Over the past few weeks, the US Dollar has been outperforming its major peers as traders priced out market speculation of the Federal Reserve (Fed) to deliver another larger-than-usual interest rate cut of 50 basis points (bps) in November. As September US data has diminished fears of a potential slowdown, traders expect the Fed to cut interest rates gradually.
• According to the CME FedWatch tool, traders are pricing in two rate cuts of 25 basis points (bps) in November and December, which will push interest rates lower to 4.25%-4.50% by the year-end.
• Going forward, investors will focus on market expectations over the US presidential elections. Currently, there is a neck-to-neck competition between Donald Trump and Kamala Harris. According to FiveThirtyEight’s daily election poll tracker, Harris is leading polls and has a 2.4-percentage-point lead over Trump.

Technical Analysis: EUR/USD holds above 1.0800

EUR/USD endeavors to hold the immediate support of 1.0800 in European trading hours. The major currency pair extended its downfall after breaking below the 200-day Exponential Moving Average (EMA), which trades around 1.0910, earlier this week.

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

The 14-day Relative Strength Index (RSI) dives below 30.00, indicating a strong bearish momentum though entering in oversold conditions. 

On the downside, the major could find support near the upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA and the psychological figure of 1.1000 will be the key resistances for the pair.