CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD lost another one-third of one percent on Thursday.
• The ECB cut rates in-line with expectations, stripping support from underneath the Euro.
• US data blew the doors off market forecasts, further bolstering the Greenback.

EUR/USD continues to backslide following the European Central Bank’s (ECB) quarter-point rate trim early Thursday. A lack of bullish momentum has Fiber extending near-term losses, and the pair is down over 3.5% from late September’s peak bids just above 1.1200.

The ECB trimmed its reference rates exactly in-line with median market forecasts, delivering a 25 bps cut to its Rate on Deposit Facility and Main Refinancing Operations Rate, easing the reference rates to 3.25% and 3.4%, respectively. As if the Euro didn’t have enough support as it is, Europe’s final Harmonized Index of Consumer Prices (HICP) inflation for the year ended September also declined more than expected, with the final print coming in at just 1.7% YoY compared to the expected 1.8%.

All that remains on the EU-centric economic data docket is Friday’s upcoming EU Leadership Summit, but the event is unlikely to spark much confidence in the Euro as policymakers grapple with a lopsided economy tilting toward a steeper slowdown despite insistence from leaders that it isn’t.

US Retail Sales grew by 0.4% MoM in September, recovering from August’s 0.1% and beating median market forecasts of a 0.3% print. Retail Sales excluding Automotive spending also thumped forecasts, growing by 0.5% in September compared to the expected 0.1%, and easily vaulting over August’s 0.2% increase.

US Initial Jobless Claims for the week ended October 11 also beat market expectations, coming in at 241K for the week. Investors expected the week’s new jobless claimant count to hold steady at the previous week’s revised 260K.

EUR/USD price forecast

EUR/USD has experienced significant bearish pressure, breaking below both the 50-day Exponential Moving Average (EMA) at 1.0996 and the 200-day EMA at 1.0904, marking a clear bearish shift in market sentiment. The pair is now trading near 1.0828, testing multi-week lows as the downside momentum intensifies. A sustained break below 1.0800 could lead to further declines, with the next major support area around 1.0750. The sharp decline in recent sessions reflects the growing strength of the bearish trend, with sellers maintaining control as the pair moves away from key moving averages.

The Moving Average Convergence Divergence (MACD) indicator is deeply entrenched in negative territory, with both the MACD and signal lines showing no signs of reversal, suggesting that bearish momentum could continue. The histogram is expanding further into the negative, indicating an acceleration of the downside movement. If the pair fails to hold the 1.0800 support level, we could see additional losses, with 1.0750 and possibly 1.0700 on the horizon. On the flip side, a recovery above 1.0900, where the 200-day EMA lies, is needed to diminish the bearish outlook and bring some relief to the bulls.

EUR/USD daily chart

EUR is expected to decline gradually, potentially reaching 1.0825. 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 note.

Downward momentum can be short-lived

24-HOUR VIEW: “We expected EUR to edge lower yesterday, but we indicated that ‘due to mild momentum, any decline is unlikely to break clearly below 1.0860.’ Our anticipation for EUR to weaken was correct, but we underestimated the decline as it dropped to a low of 1.0853. Downward momentum has increased, albeit not much. Today, we continue to expect EUR to decline gradually, potentially to 1.0825. We do not expect the major support at 1.0770 to come into view. On the upside, resistance levels are at 1.0880 and 1.0900.”

1-3 WEEKS VIE: “Our most recent narrative was from two days ago (16 Oct, spot at 1.0905), wherein we indicated that “the slight increase in momentum suggests there is a chance of EUR breaking below the support zone of 1.0860/1.0885, but it remains to be seen if it can maintain a foothold below these levels.’ Yesterday, EUR fell below the support zone, reaching a low of 1.0853. While we would prefer a more definitive break, the price action suggests that the EUR weakness that started early this month remains intact. The next significant support level is some way off at 1.0770. To reach this level, EUR must keep moving lower, or the likelihood of it reaching this level will diminish quickly. Conversely, a breach of the ‘strong resistance’ at 1.0935 (level was at 1.0950 yesterday) would mean that the weakness has stabilised.”

• EUR/USD extends its downside to near 1.0850 as traders brace for the ECB policy meeting.
• The ECB is expected to cut its key borrowing rates by 25 bps for the second straight meeting.
• Growing speculation for Trump’s victory has strengthened the US Dollar.

EUR/USD exhibits weakness near 1.0850 on Thursday. The major currency pair faces sharp selling pressure ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 12:15 GMT. 

Traders expect the ECB to reduce its Rate on Deposit Facility further by 49 basis points (bps) in the remaining two meetings this year, according to a note from Citi on Tuesday, suggesting that there will be two rate cuts of 25 bps on Thursday and in December. 

A quarter-to-a-percentage rate cut on Thursday will be the second in a row, pushing the deposit facility rate lower to 3.25%. A dovish decision from the ECB is widely anticipated as the Eurozone economy appears to be on the path of an economic slowdown, with price pressures seeming under control. 

With high confidence in the ECB to reduce interest rates again, investors will pay close attention to the monetary policy statement and ECB President Christine Lagarde’s press conference to get fresh cues about the likely monetary policy action in December. 

Christine Lagarde is expected to talk more about reviving economic growth as the Eurozone Harmonized Index of Consumer Prices (HICP) has decelerated to 1.8% in September, according to flash estimates. The latest economic projections from the German economic ministry showed that the nation is expected to conclude the year with a decline in the overall output by 0.2%.

Daily digest market movers: EUR/USD weakens on multiple headwinds

• EUR/USD extends its losing streak for the fourth trading day on Thursday. The major currency pair declines to a more than 10-week low near 1.0850 as the US Dollar (USD) has performed strongly in the past few weeks. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, jumps to near 103.60, the highest level seen in over two months.
• The Greenback remains firm as traders have priced out expectations of the continuation of hefty rate cuts from the Federal Reserve (Fed) and growing speculation of former US President Donald Trump’s victory in presidential elections, scheduled on November 5.
• Market participants expect the Fed to cut interest rates moderately in the remainder of the year as fears of a United States (US) economic slowdown have been subsided by robust growth in the Nonfarm Payrolls (NFP) and the Services Purchasing Managers’ Index (PMI) data for September.
• Meanwhile, Trump’s victory over Democratic Vice President Kamala Harris is expected to result in higher tariffs on imports from Asian and European peers, tax cuts, and loosening financial conditions that will benefit the US Dollar.
• On the economic front, investors will focus on the US monthly Retail Sales data for September, which will be published at 12:30 GMT. Economists expect Retail Sales to have grown by 0.3%.

Technical Analysis: EUR/USD weakens to 1.0850

EUR/USD slides further to near 1.0850 in European trading hours. The major currency pair extends its downfall after breaking below the 200-day Exponential Moving Average (EMA), which trades around 1.0900, 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. 

On the downside, the major could find support near the round-level figure of 1.0800 and 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 weakens to around 1.0850 in Thursday’s Asian session. 
• Traders expect that the Fed will proceed with modest interest rate cuts over the next year. 
• The ECB is widely expected to cut interest rates at its October meeting on Thursday. 

The EUR/USD pair extends its decline to near 1.0850 during the early Asian session on Thursday. The further upside of the Greenback exerts some selling pressure on the major pair. Investors will closely monitor the European Central Bank (ECB) monetary policy meeting, which is expected to lower interest rates again on Thursday. 

The Federal Open Market Committee (FOMC) at its September meeting took the unusual step of lowering its benchmark interest rate by a half percentage point to a target range of 4.75% to 5.00%. However, investors now anticipate that the Federal Reserve (Fed) will proceed with modest interest rate cuts over the next year, which underpin the Greenback broadly. 

Fed Governor Christopher Waller said on Monday that future interest rate cuts will be less aggressive than the large move in September, as he is concerned that the economy could still be running at a hotter-than-expected pace. Later on Thursday, investors will take more cues from the US Retail Sales data, which is expected to rise from 0.1% in August to 0.3% in September. 

Across the pond, the ECB is likely to deliver its third interest rate cut of the year at its October meeting, and money markets almost fully price in three further rate reductions through March 2025. ECB President Christine Lagarde said last month that the latest developments had strengthened the ECB’s confidence that inflation will return to target in a timely manner and said this would be taken into account in October. The dovish comments from the ECB policymakers and softer-than-expected inflation from the Eurozone might weigh on the Euro (EUR) against the US Dollar (USD). 

• EUR/USD withered further on Wednesday, sagging below 1.0900.
• ECB rate cut looms large around the corner, broadly expected to trim rates 25 bps.
• Final EU inflation figures are unlikely to move the needle on Thursday.

EUR/USD is in freefall, plummeting to multi-week lows as the Euro continues to crumple ahead of the European Central Bank’s (ECB) upcoming rate call on Thursday. The ECB is widely expected to trim interest rates by a quarter of a percent, or 25 bps.

All eyes will be on the ECB during Thursday’s European market session. The ECB is widely expected to trim its Main Refinancing Operations Rate by 25 bps to 3.4% from 3.65%, with the ECB’s Rate on Deposit Facility expected to take a matching 25 bps trim to 3.25% from 3.5%. With the ECB broadly expected to reduce rates in the face of a lopsided and cooling pan-EU economy, the Euro is running out of room quickly and can be expected to continue declining in the near-term.

With the ECB set to dominate Fiber flows heading into the back half of the trading week, all that’s on the Greenback side of the data docket will be Thursday’s US Retail Sales. Markets are expecting an improvement in US retailer volumes, forecasting a MoM uptick of 0.3% in September Retail Sales compared to August’s 0.1% print.

EUR/USD price forecast

EUR/USD continues to tilt firmly into bearish momentum, slumping further below the 200-day Exponential Moving Average (EMA) at the 1.0900 handle. Extended short pressure could see the pair continue its current one-sided backslide to the 1.0800 region.

Fiber is down over 3% and falling fast after tumbling from recent highs above the 1.1200 handle set in late September. The pair has closed in the red for all but four of the last 15 consecutive trading days, and is poised for a third consecutive bearish week.

EUR/USD daily chart

• EUR/USD withered further on Wednesday, sagging below 1.0900.
• ECB rate cut looms large around the corner, broadly expected to trim rates 25 bps.
• Final EU inflation figures are unlikely to move the needle on Thursday.

EUR/USD is in freefall, plummeting to multi-week lows as the Euro continues to crumple ahead of the European Central Bank’s (ECB) upcoming rate call on Thursday. The ECB is widely expected to trim interest rates by a quarter of a percent, or 25 bps.

All eyes will be on the ECB during Thursday’s European market session. The ECB is widely expected to trim its Main Refinancing Operations Rate by 25 bps to 3.4% from 3.65%, with the ECB’s Rate on Deposit Facility expected to take a matching 25 bps trim to 3.25% from 3.5%. With the ECB broadly expected to reduce rates in the face of a lopsided and cooling pan-EU economy, the Euro is running out of room quickly and can be expected to continue declining in the near-term.

EUR/USD price forecast

EUR/USD continues to tilt firmly into bearish momentum, slumping further below the 200-day Exponential Moving Average (EMA) at the 1.0900 handle. Extended short pressure could see the pair continue its current one-sided backslide to the 1.0800 region.

Fiber is down over 3% and falling fast after tumbling from recent highs above the 1.1200 handle set in late September. The pair has closed in the red for all but four of the last 15 consecutive trading days, and is poised for a third consecutive bearish week.

EUR/USD daily chart

• EUR/USD stays below 1.0900 as the ECB is expected to cut its borrowing rates by 25 bps on Thursday.
• Increasing speculation for Donald Trump’s victory in the US presidential elections has dampened the Eurozone’s economic outlook.
• Fed’s Waller advised a gradual reduction of interest rates over the next year.

EUR/USD falls further to near 1.0880 in Wednesday’s European session. The major currency pair weakens as the Euro (EUR) underperforms on expectations that the European Central Bank (ECB) will cut interest rates again on Thursday.

The ECB is widely anticipated to reduce its Rate on Deposit Facility by 25 basis points (bps) to 3.25%. This would be the second straight interest rate cut by the ECB in a row. With strong confidence that the ECB will cut interest rates tomorrow, investors will pay close attention to the monetary policy statement and ECB President Christine Lagarde’s press conference to get fresh cues on the interest rate outlook. 

The comments from Lagarde are expected to be dovish as price pressures in the Eurozone appear to be under control, and fears of an economic slowdown have grown significantly. According to the preliminary estimates, the Eurozone Harmonized Index of Consumer Prices (HICP) decelerated to 1.8% in September. Meanwhile, the second estimate for the monthly Consumer Price Index (CPI) (EU Norm) in France and Italy has shown that price pressures were slower than preliminary expectations.

Growing speculation about former US President Donald Trump winning the United States (US) presidential elections has also raised concerns over the European Union’s (EU) export outlook. Trump's victory is expected to result in tariff hikes on automotive imports to the US, which could dent exports from the old continent and lead to more weakness in economic growth. 

Daily digest market movers: EUR/USD remains under pressure as US Dollar rises further

• EUR/USD faces pressure due to the US Dollar’s outperformance in the past few weeks. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its upside to near 103.40. The Greenback strengthens as traders see the US Federal Reserve (Fed) gradually reducing interest rates in the remainder of the year.
• The Fed is expected to shift to a ‘moderate’ policy-easing stance from ‘aggressive’ as fears of an economic slowdown have waned after Nonfarm Payrolls (NFP) and the US Services Purchasing Managers Index (PMI) grew strongly, with price pressures rising faster than expected in September.
• According to the CME FedWatch tool, traders are confident that the central bank will cut interest rates by 25 bps in November and December.
• On the contrary, Fed Governor Christopher Waller cautioned over interest rate cuts this week in a speech at Stanford University, citing that "Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year," Reuters reported. When asked about the current status of the job market, Waller said, “The labor market remains healthy, even as labor demand is moderating.”
• Going forward, the next trigger for the US Dollar will be the monthly Retail Sales data for September, which will be published on Thursday. Economists expect the Retail Sales data to have grown by 0.3% after rising 0.1% in August.

Technical Analysis: EUR/USD trades close to 200-day EMA

EUR/USD trades cautiously below the key resistance of 1.0900 in the European trading hours. The major currency pair weakened after a breakdown of the Double Top formation on a daily timeframe on October 4, which resulted in a bearish reversal.

The shared currency pair wobbles near the 200-day Exponential Moving Average (EMA) around 1.0900. A bear cross, represented by the 20- and 50-day EMAs near 1.1020, suggests more weakness ahead.

The 14-day Relative Strength Index (RSI) dives to near 30.00, indicating a strong bearish momentum. 

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 psychological figure of 1.1000 will be the key resistance for the pair.

The Euro (EUR) is expected to edge lower; due to mild momentum, any decline is unlikely to break clearly below 1.0860. In the longer run, chance of EUR breaking below the major support zone of 1.0860/1.0885; it remains to be seen if it can maintain a foothold below these levels, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

EUR can break below of 1.0860/1.0885

24-HOUR VIEW: “We highlighted yesterday that EUR ‘could dip to 1.0885 before the risk of a more sustained rebound is likely.’ We added, ‘the next support at 1.0860 is unlikely to come into view.’ Our view was not wrong, as EUR edged lower to 1.0881, closing at 1.0890 (-0.17%). There has been a slight increase in momentum. Today, we expect EUR to edge lower, but due to the mild momentum, any decline is unlikely to break clearly below 1.0860. Resistance is at 1.0900; a breach of 1.0915 would indicate that the current mild downward pressure has faded.”

1-3 WEEKS VIEW: “We highlighted yesterday (15 Oct, spot at 1.0905) that ‘the slight increase in momentum suggests there is a chance of EUR breaking below the support zone of 1.0860/1.0885, but it remains to be seen if it can maintain a foothold below these levels.’ EUR then dipped to a low of 1.0886. We continue to hold the same view. Looking ahead, the next support level below the support zone is at 1.0775. At this time, the likelihood of EUR declining to this level is low. On the upside, a breach of 1.0950 (‘strong resistance’ level was at 1.0960 yesterday) would indicate that the weakness in EUR that started early in this month has stabilised.”

• EUR/USD depreciates as the ECB could deliver a 25 basis cut on Main Refinancing Operations and the Deposit Facility.
• The US Dollar Index hovers near its two-month high of 103.35, reached on Monday.
• Atlanta Fed President Raphael Bostic anticipates just one more interest rate cut of 25 basis points in 2024.

EUR/USD holds its position after a four-day losing streak, trading around 1.0890 during the Asian session on Wednesday. The Euro may face downward pressure as the European Central Bank (ECB) is widely anticipated to implement a 25 basis point cut on both the Main Refinancing Operations and the Deposit Facility Rate during Thursday’s policy meeting.

Traders are expected to closely watch the Harmonized Index of Consumer Prices (HICP) data from the Eurozone, set to be released on Thursday, ahead of the European Central Bank (ECB) policy decision.

Additionally, the ECB's Monetary Policy Statement and President Christine Lagarde's speech during the post-meeting press conference will be key events of interest, as they may provide insights into the bank's monetary policy direction.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against other six major currencies, maintains its position around its two-month high of 103.35, recorded on Monday. Last week’s strong jobs and inflation data have reduced expectations for aggressive easing by the Federal Reserve (Fed) in 2024.

Markets are now forecasting a total of 125 basis points in rate cuts over the next year. According to the CME FedWatch Tool, there is currently a 94.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.

On Tuesday, Federal Reserve Bank of Atlanta President Raphael Bostic stated that he anticipates just one more interest rate cut of 25 basis points this year, as reflected in his projections during last month's US central bank meeting. "The median forecast was for 50 basis points beyond the 50 basis points already implemented in September, according to Reuters.

• EUR/USD shed another fifth of a percent on Tuesday.
• ECB Bank Survey results trimmed bullish Euro potential.
• ECB broadly expected to deliver another 25 bps rate cut this week.

EUR/USD fell further into the bearish side on Tuesday, declining one-fifth of one percent and slipping below the 200-day Exponential Moving Average (EMA). Price action closed below the 1.0900 handle for the first time since early August. Fiber has now fallen nearly 3% from late September’s peaks just north of the 1.1200 handle.

European banks broadly reported negative repercussions from the European Central Bank’s (ECB) summertime rate cut, with EU-area banks reporting that while credit standards have remain unchanged overall and actually eased for loans to households, consumer credit conditions remain tight. A rebound in housing loan demand is riding exclusively on anticipation of further rate cuts, implying consumers are over-borrowing in the near-term, while EU bank net interest income as a result of ECB policy rate decisions has turned negative for the first time since 2022.

The ECB’s upcoming rate call on Thursday is broadly expected to be a quarter-point rate trim on the main deposit rate with markets widely forecasting a 25 bps rate cut, while the ECB main refi rate is expected to get trimmed by a similar 25 bps to 3.4% from 3.65%.

Elsewhere on the Fiber data docket, US Retail Sales figures for September are slated for Thursday’s US market session. US Retail Sales are expected to rebound for the month of September, forecast to rise to 0.3% MoM from the previous 0.1%.

EUR/USD price forecast

EUR/USD has slid back below the 200-day EMA and lost hold of the 1.0900 handle. The pair has closed in the red for all but three of the last 12 consecutive trading days. Oversold warnings on the Moving Average Convergence-Divergence (MACD) implies that near-term short momentum on Fiber may have run its course, leaving the pair primed for a bullish rebound from the 200-day EMA.

EUR/USD daily chart

• EUR/USD continues sliding and making lower lows. 
• It has almost reached the first target for the Double Top reversal pattern it completed last month. 

EUR/USD bleeds lower after piercing through a long-term trend line. The 50 and 100-day Simple Moving Averages (SMA) also lie broken in its wake. Nothing can stop bears now, or so it seems. The trend is down, and given “the trend is your friend” the odds favor more.

EUR/USD Daily Chart 

EUR/USD probably formed a Double Top reversal pattern in August and September. The first downside target for the pattern lies at 1.0872 which has almost been met at the low of the day (1.0885). This equates with the 61.8% Fibonacci extension of the height of the Double Top extrapolated lower (blue shaded rectangle on the chart). 

A further target lies at 1.0874, at the (green) 200-day SMA. Another more bearish target lies at 1.0824, generated by the trendline break.

The fact the initial target at 1.0872 has almost been met could mean that bearish momentum will ease off. However, momentum is not oversold yet and a break below 1.0860 would probably suggest more downside towards the target at 1.0824.

Momentum, as measured by the Relative Strength Index (RSI), is mirroring price as it tracks lower, which is a mildly bearish sign. 

EUR/USD edged below 1.09 briefly overnight behind broader USD strength. EUR short-covering plus a stronger than expected ZEW Expectations reading for October lifted spot slightly, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR recovers from sub-1,09 levels

“The investor sentiment index nudged up to 13.1, form 3.6 in September, above consensus expectations for a rise to 10. The news is only somewhat positive for the EUR as firmer sentiment is being supported by investor hopes for quicker ECB rate cuts.

“The broader bear trend in EUR/USD remains well-entrenched on the short-term chart but intraday price action is reflecting some demand for the EUR on dips below 1.09, with two bull “hammer” signals developing around the lows over the past 24 hours.”

“EUR faces minor resistance at 1.0925 on the hourly chart and will need to push above that point this morning to extend the rebound to the mid/upper-1.09s. Broader technical patterns continue to point to a decline to the 1.08 area, however, so markets will likely took to fade modest EUR gains below 1.10.”

Downward momentum has increased slightly; the Euro (EUR) could dip to 1.0885 before the risk of a more sustained rebound is likely. In the longer run, chance of EUR breaking below the major support zone of 1.0860/1.0885; it remains to be seen if it can maintain a foothold below these levels, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR can break below 1.0860/1.0885

24-HOUR VIEW: “Yesterday, we indicated that ‘the bias for EUR is tilted to the downside.’ However, we pointed out that ‘given the mild momentum, any decline is unlikely to break clearly below 1.0900, and the next support at 1.0885 is unlikely to come under threat.’ EUR subsequently dropped more than expected to 1.0888, before recovering to close at 1.0909 (-0.26%). Despite the decline, downward momentum only increased slightly. Today, EUR could dip to 1.0885 before a more sustained rebound is likely. The next support at 1.0860 is unlikely to come into view. To maintain the mild momentum, EUR must not break above 1.0935 with minor resistance at 1.0920.”

1-3 WEEKS VIEW: “In our most recent narrative from last Friday (11 Oct, spot at 1.0935), we highlighted that ‘while the outlook for EUR 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.’ Yesterday, EUR fell to a low of 1.0888. The slight increase in momentum suggests there is a chance of EUR breaking below the support zone of 1.0860/1.0885, but it remains to be seen if it can maintain a foothold below these levels. Overall, only a breach of 1.0960 (‘strong resistance’ level was 1.0980 yesterday) would mean that the weakness in EUR that started early in this month has stabilised.”

• EUR/USD attracts sellers for the second successive day amid a bullish USD.
• Bets for smaller Fed rate cuts and geopolitical risks underpin the Greenback.
• Bears might refrain from placing fresh bets ahead of the ECB on Thursday. 

The EUR/USD pair drifts lower for the second straight day on Tuesday and drops to the 1.0890 area in the last hour, back closer to its lowest level since August 8 touched the previous day. Bearish traders, however, need to wait for a break below the 200-day Simple Moving Average (SMA) before placing fresh bets ahead of the key central bank event risk.

The European Central Bank (ECB) is scheduled to announce its policy decision on Thursday and is expected to cut interest rates again for the third time this easing cycle amid mounting concerns over sluggish growth. Furthermore, inflation in the Eurozone fell below the ECB's 2% target for the first time since 2021 and backs the case for further policy easing. This, in turn, undermines the shared currency, which, along with a bullish US Dollar (USD), turns out to be a key factor weighing on the EUR/USD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near a two-month top amid firming expectations for a less aggressive policy easing by the Federal Reserve (Fed). In fact, the markets have now fully priced out the possibility of another oversized Fed rate cut in November, which keeps the US Treasury bond yields elevated. Moreover, geopolitical risks benefit the safe-haven buck and support prospects for a further depreciating move for the EUR/USD pair. 

Traders now look forward to Tuesday's economic docket – featuring the release of the German ZEW Economic Sentiment Index and Eurozone Industrial Production figures. Later during the North American session, the Empire State Manufacturing Index and speeches by influential FOMC members will drive the USD demand, which, in turn, should provide short-term impetus to the EUR/USD pair.

• EUR/USD is set to decline for a third straight week against the Greenback.
• Fiber kicked off the new trading week finding fresh lows as Euro confidence wanes.
• ECB is set to trim rates by another 25 bps this week.

EUR/USD hit a fresh ten-week low on Monday, kicking off a new trading week with renewed declines. The Euro shed one-quarter of one percent against the Greenback, knocking into the 200-day Exponential Moving Average (EMA) as USD strength parlays with a broadly weakening EUR.

The latest European Central Bank (ECB) Lending Survey results are expected early Tuesday, and investors will be looking for any hints about the overall health of the pan-European banking sector this week.

Final European Harmonized Index of Consumer Prices (HICP) inflation figures are due early Thursday, but they are unlikely to drive much volatility as markets watch the European Central Bank (ECB), which is broadly expected to trim interest rates by 25 basis points, also on Thursday.

Meaningful US data isn’t due until Thursday’s US Retail Sales, expected to accelerate to 0.3% MoM in September after August’s lackluster 0.1%.

EUR/USD price forecast

EUR/USD is succumbing to clear bearish pressure, with the pair falling into the 200-day EMA and backsliding into the 1.0900 handle at the same time. The Fiber has tumbled nearly 3% top-to-bottom from late September’s peaks just above 1.1200, and the pair has closed in the red for all but four of the last 13 straight trading days.

The price action around the 200-day EMA will be critical in determining the near-term direction of EUR/USD. A sustained break below this level could open the door to further downside, with the next support zone seen around the 1.0850 level. On the other hand, if the pair manages to reclaim the 200-day EMA and move back above 1.09063, it might alleviate some of the immediate bearish pressure. However, the 50-day EMA remains a key resistance level that needs to be breached for any sustained bullish reversal.

The technical outlook remains bearish as long as the pair stays below the 50-day EMA. While the 200-day EMA at 1.09063 may provide some temporary support, the current trend suggests continued downside risks in the near term. The lack of a strong bullish catalyst means the pair could remain under pressure, and traders will be watching for further signs of weakness, especially if the pair remains below key moving averages.

EUR/USD daily chart

• EUR/USD edges down as the US Dollar (USD) strengthens on safe-haven flows. 
• China is saber-rattling in the South China Sea around Taiwan. 
• Traders sell the Euro ahead of the expected cut at the ECB policy meeting on Thursday. 

EUR/USD exchanges hands in the 1.0920s on Monday, marginally down on the day, as the US Dollar (USD) attracts safe-haven flows on the back of increasing geopolitical risks stemming from Taiwan, where the Chinese People's Liberation Army (PLA) is conducting drills. This prompted a spokesperson from the US Department of State to say on Monday that they were “seriously concerned” with the PLA’s activities in the Strait of Taiwan.

EUR/USD comes under pressure ahead of ECB meeting

EUR/USD could also come under increasing pressure as traders sell the Euro (EUR) ahead of the European Central Bank (ECB) meeting on Thursday. Most analysts now expect the bank to announce a further 25 basis point (bps) (0.25%) rate cut at the policy meeting, making it the second cut in a row. This, in turn, is likely to weaken the Euro since falling interest rates attract lower foreign capital inflows.

In September, Eurozone headline inflation declined to 1.8%, falling below the ECB’s 2.0% target for the first time in over three years. This, combined with a slowdown in economic activity, is increasing bets of another rate cut on Thursday. Such a move would signal a significant “gear change up” in terms of the pace and timing of the ECB’s easing cycle.  

Trading floors in the US, meanwhile, will likely be mostly empty due to employees being away for the Columbus Day public holiday on Monday. Although some equity trading will still go on, the US bond market will be closed.  

Investors expect a 25 bps rate cut from the Federal Reserve (Fed) in November after US Producer Price Index (PPI) inflation data on Friday, which showed headline PPI slowed to 0.0% on a monthly basis in September – missing expectations of 0.1% and the prior month’s 0.2% reading. Core PPI inflation, which excludes volatile food and energy prices, slowed to 0.2% from 0.3% in August. Annual readings, however, resulted mixed, as PPI decelerated while core PPI rose by 2.8%, above the prior month’s 2.6%. Although mixed annual performance, the monthly readings weighed, as did the preliminary US Michigan Consumer Sentiment Index for October, which fell below September’s reading and analysts’ estimates. 

The CME FedWatch Tool is showing the markets are now pricing in around a 90% chance of a 25 bps Fed rate cut – up from 83% before the PPI data. 

Technical Analysis: EUR/USD bottoms out at 100-day SMA

EUR/USD broke below a key trendline, declined to the level of the 100-day Simple Moving Average (SMA) and bottomed out.  

EUR/USD Daily Chart 

The pair probably formed a Double Top bearish reversal pattern at the August and September highs. If so, the pattern would have been confirmed after the break below the neckline at the September 11 low of 1.1002. 

The pattern’s initial downside target lies at 1.0872, the 61.8% Fibonacci extension of the height of the pattern extrapolated lower (blue shaded rectangle on the chart). A further target lies at 1.0874, the 200-day SMA, and 1.0824, the target generated by the trendline break.

Momentum, as measured by the Relative Strength Index (RSI), is mirroring price as it tracks lower, which is a relatively bearish sign. 

Bias for the Euro (EUR) is tilted to the downside; given the mild momentum, any decline is unlikely to break clearly below 1.0900. 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 FC analysts Quek Ser Leang and Lee Sue Ann note.

EUR can break the 1.0860/1.0885 support zone

24-HOUR VIEW: “After EUR dropped briefly to 1.0898, then rebounded, we indicated last Friday that ‘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.’ While our view of range trading was not wrong, EUR traded in a much narrower range of 1.0925/1.0953, closing largely unchanged at 1.0937 (+0.02%). Downward momentum has increased slightly, and the bias for today is tilted to the downside. Given the mild momentum, any decline is unlikely to break clearly below 1.0900. The next support at 1.0885 is unlikely to come under threat. Resistance levels are at 1.0945 and 1.0960.”

1-3 WEEKS VIEW: “Not much has happened since our update on Friday (11 Oct, spot at 1.0935). As highlighted, while the outlook for EUR 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. However, only a breach of 1.0980 (‘strong resistance’ level was at 1.0995 last Friday) would mean that the weakness in EUR that started early in the month has stabilised.”

• EUR/USD trades in negative territory for the fourth consecutive day around 1.0920 in Monday’s Asian session. 
• The risk-off mood supports the US dollar broadly. 
• The dovish stance of the ECB weighs on the shared currency. 

The EUR/USD pair extends the decline to near 1.0920 during the early Asian session on Monday. The risk aversion amid the escalating geopolitical tensions in the Middle East and conflicts between China and Taiwan exert some selling pressure on the riskier currency like the Euro (EUR). 

On Monday, a spokesperson at the US Department of State said they are “seriously concerned by the People's Liberation Army (PLA) military drills in the Taiwan Strait and around Taiwan.” They further stated that they will monitor PRC activities and coordinate with allies and partners regarding our shared concerns. Any signs of escalating tensions could boost the safe-haven flows, benefiting the Greenback and weighing on the major pair. 

Traders expect a 25 basis points (bps) rate cut from the Federal Reserve (Fed) in November after the US Producer Price Index (PPI)  on Friday. The CME FedWatch Tool showed the markets are now pricing in nearly an 86.8% chance of a 25 bps Fed rate cut, up from 83.3% before the PPI data. 

Across the pond, the Euro faces some pressure as the European Central Bank (ECB) is expected to cut interest rates further in both monetary policy meetings remaining this year. The ECB's dovish stance increased by a faster-than-expected decline in Eurozone inflationary pressures and 'fragile' economic recovery. 

• 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%.