EUR/USD Price Analysis – Oct 09, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair continues its bearish trend, hovering around 1.0960 as the US Dollar strengthens ahead of the release of the FOMC Minutes. Meanwhile, the Euro (EUR) remains under selling pressure as traders have factored in expectations of further rate cuts by the European Central Bank (ECB).
The ECB is anticipated to lower its Deposit Facility Rate by 50 basis points to 3% by year-end, implying two 25 basis point cuts in the upcoming policy meetings scheduled for next week and December.
Euro Under Pressure as ECB Signals More Rate Cuts
On the EUR front, the Euro is under pressure as traders expect more rate cuts from the European Central Bank (ECB). The ECB is anticipated to lower its Deposit Facility Rate by 50 basis points (bps) to 3% by the end of this year, with two 25 bps cuts planned for the upcoming policy meetings in November and December.
This comes after the ECB already cut borrowing rates by 50 bps earlier this year, as officials believe inflation will return to the target of 2% by 2025. The declining trend in price pressures and weak economic growth in the Eurozone have fueled these expectations.
ECB policymaker and Governor of the Greek Central Bank, Yannis Stournaras, also supports two more rate cuts this year and suggests further reductions in 2025 as inflation continues to ease. In a recent interview with the Financial Times, he mentioned that inflation is slowing down faster than the ECB had predicted in September, reinforcing the case for additional rate cuts. This has increased market expectations for continued monetary easing as the Eurozone economy remains vulnerable.
Therefore, the anticipated rate cuts by the ECB are likely to weaken the Euro against the US Dollar, leading to continued bearish pressure on the EUR/USD pair. As traders react to these expectations, the Euro may struggle to regain strength.
US Dollar Strengthening Puts Pressure on EUR/USD Pair
On the US front, the broad-based US Dollar (USD) continues to strengthen, putting pressure on the EUR/USD pair. The US Dollar Index (DXY) has climbed to a seven-week high of 102.70 as traders adjust their expectations regarding future interest rate cuts from the Federal Reserve (Fed).
Following a strong Nonfarm Payrolls (NFP) report for September, concerns about economic growth and consumer spending have eased, leading many traders to unwind their earlier bets on significant rate cuts. Moreover, heightened tensions in the Middle East have increased the appeal of the USD as a safe haven asset.
Looking ahead, financial market participants expect the Fed to implement a smaller rate cut of 25 basis points in the remaining two policy meetings this year. Investors will be closely watching the Federal Open Market Committee (FOMC) Minutes from September, scheduled for release on Wednesday at 18:00 GMT.
The strengthening US Dollar, driven by positive economic data and shifting rate expectations, is likely to maintain downward pressure on the EUR/USD pair. As traders adjust their positions, the Euro may struggle to recover against the robust Greenback.
EUR/USD - Technical Analysis
The Euro (EUR/USD) is currently trading at $1.09616, down 0.17% for the day, as bearish momentum dominates. The pair is moving below the key pivot point of $1.09529 on the 4-hour chart, signaling continued downward pressure. Immediate resistance is situated at $1.09991, followed by $1.10163 and $1.10362, suggesting that buyers will need to push the pair above these levels to regain control.
On the downside, immediate support lies at $1.09400, with additional supports at $1.09275 and $1.09141. A break below $1.09400 could lead to further declines, targeting these lower levels. The 50-day Exponential Moving Average (EMA) at $1.09906 is currently acting as a critical resistance level, reflecting a bearish bias as long as prices remain beneath it.
The Relative Strength Index (RSI) stands at 39, indicating a nearing oversold condition that could trigger a potential consolidation or short-term rebound if support holds.
Traders may consider a buying opportunity if EUR/USD breaks above $1.09527, targeting a move to $1.09924, with a stop-loss set below $1.09278 to manage risk. On the other hand, failure to hold above $1.09529 could signal a deeper correction toward the next support at $1.09275.
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