EUR/USD Price Analysis – Oct 16, 2024

Daily Price Outlook

During the European trading session on Wednesday, the EUR/USD currency pair continued its downward trend, falling to around 1.0880. The Euro (EUR) is struggling amid growing expectations that the European Central Bank (ECB) will lower interest rates again on Thursday. This outlook has put significant pressure on the major currency pair.

At the same time, the US dollar has been on a strong upswing over the past few weeks, contributing to the Euro's decline. The US Dollar Index, which measures the Greenback against six major currencies, climbed to approximately 103.40. Traders are increasingly confident that the US Federal Reserve (Fed) will gradually reduce interest rates for the rest of the year, further bolstering the Dollar's strength.

EUR/USD Declines as ECB Rate Cut Expectations and Economic Concerns Weigh on the Euro

On the EUR front, the EUR/USD currency pair has dropped due to expectations that the European Central Bank (ECB) will cut interest rates again on Thursday. Analysts predict the ECB will lower its Rate on Deposit Facility by 25 basis points to 3.25%, marking the second consecutive rate cut. Investors are closely watching the monetary policy statement and ECB President Christine Lagarde’s press conference for insights into the future of interest rates.

Lagarde is likely to take a dovish stance, as inflation pressures in the Eurozone seem to be easing, while concerns about an economic slowdown are growing. Preliminary data shows that the Eurozone's Harmonized Index of Consumer Prices (HICP) fell to 1.8% in September.

Moreover, recent estimates for the Consumer Price Index (CPI) in France and Italy indicate lower-than-expected inflation. Compounding these concerns, speculation about former US President Donald Trump potentially winning the upcoming US presidential elections has raised worries about the EU’s export outlook. If Trump wins, tariffs on automotive imports to the US could increase, negatively impacting exports from Europe and further slowing economic growth.

Therefore, the anticipated rate cut by the ECB and easing inflation pressures are likely to weaken the Euro further, contributing to the EUR/USD pair's decline. In the meantime, concerns over potential tariffs from a Trump presidency could negatively affect EU exports, exacerbating Euro weakness.

US Dollar Strengthens as Fed Signals Gradual Rate Cuts and Retail Sales Data Looms

On the US front, the EUR/USD pair is facing pressure due to the strong performance of the US Dollar in recent weeks. The US Dollar Index (DXY), which measures the Greenback against six major currencies, has risen to nearly 103.40. The Dollar is gaining strength as traders expect the US Federal Reserve (Fed) to gradually lower interest rates for the rest of the year.

Analysts believe the Fed will shift from an "aggressive" to a "moderate" policy-easing approach, especially after strong Nonfarm Payrolls (NFP) data and the US Services Purchasing Managers Index (PMI) showed growth, along with rising price pressures in September.

However, Fed Governor Christopher Waller has warned against rushing into interest rate cuts. In a recent speech, he mentioned that while he anticipates gradual rate reductions over the next year, the labor market remains healthy even as demand for workers is slowing.

Looking ahead, the next important indicator for the US Dollar will be the Retail Sales data for September, set to be released on Thursday. Economists predict a 0.3% increase in Retail Sales after a modest rise of 0.1% in August, which could further influence the Dollar's trajectory.

EUR/USD – Technical Analysis

EUR/USD is trading at $1.08798, down 0.09%, as the pair remains under mild bearish pressure. The price has dropped below the pivot point of $1.0892, indicating a continued downtrend.

Immediate resistance is seen at $1.0916, with further resistance levels at $1.0933 and $1.0952. On the downside, key support is located at $1.0866, followed by $1.0852 and $1.0837. If the pair breaks below these levels, further downside movement could follow.

The Relative Strength Index (RSI) is currently at 35, suggesting that while the pair is approaching oversold territory, there is still room for additional downward movement.

The 50-period Exponential Moving Average (EMA) at $1.0917 is acting as a dynamic resistance, reinforcing the bearish bias as long as the price stays below this level.

The overall trend appears bearish, with a potential for further declines if key support levels are breached.

Traders may consider entering short positions below $1.08922, with a target of $1.08570, and a stop loss at $1.09160 to protect against any upside reversal. The combination of the bearish trend and a low RSI suggests the possibility of continued weakness in the near term.

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