EUR/USD Price Analysis – Oct 25, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair is steady around 1.0830, continuing its recovery from Thursday. This rise is mainly due to a drop in the US Dollar. However, the Euro's gains may not last as the latest preliminary PMI report shows that economic activity in the Eurozone is still struggling, with the flash Composite PMI falling to 49.7 in October.
Meanwhile, the manufacturing sector has been contracting for 28 months, remaining below the key 50 mark. Although the service sector saw some growth, it was slower than expected. This ongoing decline in business activity raises concerns about the Eurozone's economic growth, leaving many unsure about the future.
Eurozone Economic Decline and ECB Rate Cut Speculation Weigh on Euro, Impacting EUR/USD Pair
As we mentioned, the gains in the shared currency might be short-lived as the latest PMI report indicates that the Eurozone's economic activity continues to decline. The flash Composite PMI dropped to 49.7 in October, showing that the manufacturing sector has been shrinking for 28 months, remaining below the crucial 50 mark that signals growth.
Although the service sector saw some unexpected growth, it was slower than hoped. This ongoing decline in business activity raises concerns about the Eurozone's economic future. Furthermore, there is increasing speculation that the European Central Bank (ECB) may implement a larger-than-usual interest rate cut in its December meeting, which could further weigh down the Euro.
This year, the ECB has already lowered its Deposit Facility Rate three times by 25 basis points, bringing it to 3.25%. Market expectations are now leaning towards a potential 50 basis point cut in December, fueled by comments from some ECB policymakers who expressed concerns about inflation staying below the bank's 2% target.
Mario Centeno, the Governor of the Bank of Portugal and an ECB policymaker noted that a 50 basis point cut is a possibility and warned of growing risks to economic growth.
Meanwhile, data released on Friday showed that the German IFO Business Climate, Current Assessment, and Expectations for October were better than expected. However, improving sentiment may not lead to a significant economic revival due to overall weak business activity.
Therefore, the ongoing decline in Eurozone economic activity and speculation of a larger interest rate cut by the ECB could weaken the Euro, putting downward pressure on the EUR/USD pair. This uncertainty may lead to increased volatility and potential losses for Euro traders.
US Dollar Recovery Supported by Fed Expectations and Economic Data, Impacting EUR/USD Pair
On the US front, the broad-based US Dollar is seeing a recovery, supported by several factors, including growing expectations that the Federal Reserve (Fed) will take a gradual approach to cutting interest rates and increasing hopes that former President Donald Trump could win the upcoming presidential election against Vice President Kamala Harris.
Investor confidence in the Fed's cautious policy is bolstered by positive economic data, including strong Nonfarm Payrolls (NFP) and Retail Sales figures for September, as well as better-than-expected flash S&P Global PMI data for October, indicating sustainable economic growth.
Moving ahead, attention will turn to the US Durable Goods Orders data for September, set to be released at 12:30 GMT, which is expected to show a decline of 1% after remaining unchanged in August.
EUR/USD – Technical Analysis
EUR/USD is trading at $1.08213, down by 0.06% as the currency pair struggles to maintain momentum near the $1.08465 pivot point. Immediate support stands at $1.08291, a level crucial for short-term sentiment.
Should EUR/USD breach this level, it could extend the bearish move toward the immediate support target of $1.07712, with a further downside likely to test $1.07486 if selling pressure intensifies.
On the upside, EUR/USD will face strong resistance at $1.08692, a level reinforced by the 50-day EMA, which is currently sitting at $1.08092. This EMA acts as a significant pivot, potentially limiting any bullish moves unless there is a sustained break above it.
Additional resistance can be found at $1.08880, providing a key barrier for bullish sentiment should the pair reverse.
The RSI reading of 59 signals modestly bullish momentum, suggesting the pair may be on the verge of testing higher resistance levels. However, the bearish pressure currently weighs heavier as the price action remains below the pivotal $1.08465 level.
Traders may want to consider a short position below $1.08288, with a take-profit target of $1.07976 and a stop-loss at $1.08465.
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