EURUSD Breaks Below 1.08 on Relentless Dovish ECB Comments

EURUSD has been falling throughout October as the ECB leans on the dovish side, and yesterday it slipped below 1.08 on relentless selling.

Skerdian Meta•Tuesday, October 22, 2024•1 min read

The FED and BOJ are expected to keep interest rates unchanged today

EURUSD has been falling throughout October as the ECB leans on the dovish side, and yesterday it slipped below 1.08 on relentless selling. The dovish ECB comments have been relentless as well, keeping the pressure on for this pair, sending it below the support indicator as well this week.

Markets are starting to price in a 50 bps ECB cut for December

After the 6-cent surge above 1.12 and a rebound off the 100 SMA (green), which has served as reliable support throughout 2024, buyers began to offload their long positions. The price was unable to maintain its position, leading to a downward reversal. Over the past four weeks, the EUR/USD has steadily declined following a doji candlestick formation, signaling a bearish reversal.

EUR/USD Chart Weekly – The 20 SMA Keeping the Trend Bearish

Last week, the dovish ECB rate cut pushed the EUR/USD down to 1.0810, but it briefly recovered as the USD weakened. However, with the return of USD buyers, fueled by rising US Treasury yields, selling pressure resumed this week. The pair broke last week’s low, dropping below 1.08 yesterday and falling under the 100 weekly SMA, signaling potential for further declines. Dovish rhetoric from the ECB continues to weigh on the Euro, with additional comments from Rehn adding to the pressure.

Villeroy’s Comments:

Risk of inflation undershooting the 2% target, especially if growth remains weak.
Inflation could reach target by early 2025.
ECB is not behind the curve, but the risk of cutting rates too late is bigger than cutting too early.
No reason for restrictive rates to persist into 2025.

Lagarde’s Dovish Tone:

Lagarde’s yesterday’s comments were even more dovish.
No 50 bps rate cut on the table yet, with the Dec 12 meeting still ahead.

Rehn’s Comments:

Growth outlook has weakened, which could increase deflationary pressures.
Rate cuts are coming, but speed and scope are yet to be decided.

EUR/USD Live Chart

EUR/USD

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.