EUR/USD Faces Pressure as ECB Expected to Cut Rates
- The Euro (EUR) to US Dollar (USD) exchange rate remains below 1.0900 ahead of the European Central Bank (ECB) decision to cut borrowing rates by 25 basis points (bps) on Thursday.
- Speculation surrounding the outcome of the US presidential elections and the possibility of Donald Trump’s victory have impacted the economic outlook in the Eurozone.
- Federal Reserve (Fed) official Waller suggests a gradual reduction in interest rates over the next year.
US Dollar Strengthens, Fed Expected to Shift Policy
The US Dollar has been outperforming in recent weeks, with the US Dollar Index (DXY) rising to near 103.40 against major currencies. Traders anticipate the Fed to slowly reduce interest rates for the rest of the year, moving from an aggressive stance to a more moderate approach.
Positive economic data, including strong Nonfarm Payrolls (NFP) and US Services Purchasing Managers Index (PMI) figures, coupled with rising price pressures in September, have alleviated concerns of an economic slowdown.
- Traders are confident in the Fed cutting rates by 25 bps in both November and December, according to the CME FedWatch tool.
- Fed Governor Waller emphasizes a gradual reduction in interest rates over the next year, citing a healthy labor market despite moderating labor demand.
Euro Faces ECB Decision and Economic Concerns
The Euro is under pressure as the ECB is expected to announce another interest rate cut on Thursday, following a previous cut. Concerns over economic growth and inflation in the Eurozone have led to expectations of dovish comments from ECB President Christine Lagarde.
- The Eurozone’s Harmonized Index of Consumer Prices (HICP) slowed to 1.8% in September, indicating controlled price pressures.
- Speculation of a Trump victory in the US elections raises worries about EU exports, potentially impacting economic growth.
Technical Analysis: EUR/USD Outlook
EUR/USD is trading below key resistance at 1.0900, with a bearish bias following a recent breakdown of a Double Top formation. The pair hovers near the 200-day Exponential Moving Average (EMA) at 1.0900, with a bearish signal from the 20- and 50-day EMAs.
- The 14-day Relative Strength Index (RSI) indicates strong bearish momentum.
- Support levels are seen at 1.0750 and resistance at 1.1000.
Upcoming Economic Indicator: ECB Rate Decision
The ECB’s decision on the Rate on Deposit Facility is a key interest rate announcement that could impact market sentiment and currency movements. The rate, expected to be cut by 25 bps to 3.25%, will be closely watched by investors for signals on the Eurozone’s economic health.
- Next release: Thursday, October 17, 2024
- Consensus: 3.25%
- Previous: 3.5%
Stay tuned for updates on how this decision could affect the EUR/USD exchange rate and global financial markets.