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).
#EURUSD new low 1.0763 approaching intra-day support
– ECB’s Holzman: Some colleagues pushing for big December rate cut pic.twitter.com/GEKGVxMoDf
— ADSS (@adssgroup) October 23, 2024
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.
🔑 Key Drivers:1️⃣ ECB considering deeper rate cuts. 2️⃣ Lagarde cautious on inflation. 3️⃣ USD strength ahead of US election.
💡 Outlook: Support at 1.0760, resistance at 1.0815.#EURUSD #Forex #ECB #FederalReserve #MarketUpdate #FXTrading #ForexNews
— ocean nexus global (@Oceannexusgs) October 23, 2024
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.
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.