EUR/USD Struggles Near $1.078 Amid ECB Rate Cut Speculation and Strong US Dollar

The EUR/USD is under heavy selling pressure and is trading near $1.0782 in the European session.

This is largely due to the faster than expected drop in Eurozone inflation which has raised concerns of a slowdown in the economy. This has led to speculation of another rate cut from the European Central Bank (ECB).

The ECB has already cut rates three times this year and many are expecting another cut in December.

As the debate grows on the effectiveness of monetary policy in controlling inflation and supporting growth, key ECB officials like Lithuanian central bank governor Gediminas Šimkus are talking about cutting rates below the neutral level of 2% to 2.25%.

But ECB President Christine Lagarde is still confident that inflation will get back to the 2% target by 2025, though she said the pace of rate cuts will depend on the data.

Dollar Strengthens As Political Uncertainty And Gradual Fed Easing

On the US front, the broad dollar is gaining strength and putting pressure on the EUR/USD. The dollar is being driven by political uncertainty with less than two weeks to go before the US presidential election.

While the polls show Vice President Kamala Harris with a slight lead, market sentiment has shifted with the possibility of former President Donald Trump winning the election. A Trump victory could mean higher tariffs and lower taxes which may prompt the Fed to stay more hawkish.

Also, the expectations around the Fed’s easing cycle is adding to the dollar’s strength. Investors are expecting 25 basis points rate cuts in November and December.

But with the strong NFP data which showed robust labor demand, analysts think the Fed won’t cut rates as big as September. Investors will be watching the Beige Book and speeches from key Fed and ECB officials including Christine Lagarde.

Technical: EUR/USD Key Levels

The EUR/USD is bearish and trading near $1.0782 with more downside. The RSI is at 29 which is oversold and could mean a short term bounce.

But the pair is still below the 50 day EMA at $1.0826 which is bearish.

EUR/USD Price Chart - Source: Tradingview

Key Levels:

  • Pivot: $1.0805

  • Resistance: $1.0826

  • Next Resistance: $1.0840

  • Support: $1.0750

  • Next Support: $1.0719

If the EUR/USD goes below $1.0750, it will go to $1.0719 and $1.0682. If it bounces, it needs to break through $1.0826 to change the trend.

Traders should watch these levels closely as both ECB and Fed policy updates can trigger big moves on the pair.

Key Points:

  • EUR/USD is under bearish pressure due to weak Eurozone inflation and strong US dollar.

  • RSI is oversold which means a bounce but overall trend is bearish.

  • $1.0750 is the immediate support; if it breaks, further down is likely.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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