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EUR/USD Eyes 1.08114 Pivot Amid Key ECB Rate Decision and 0.3% German GDP Contraction

In the Tuesday session the EUR/USD pair moved above 1.0800 but stayed within a tight range for the 6th day in a row. The Euro is still cautious as the market waits for clarity on the ECB’s next rate decision in December.

Traders are watching for a rate cut, with the Deposit Facility Rate likely to be cut further to combat low inflation and economic slowdown in Germany and the Eurozone.

Market sentiment around the ECB’s rate decision has been influenced by comments from ECB officials who said inflation could stay below 2% if no action is taken.

This has raised expectations for a bigger rate cut than usual, potentially more than 25bps as the ECB is under pressure to boost growth in a low inflation environment.

German Recession Worries Hit Eurozone Outlook

German economic slowdown is increasing the pressure on the ECB to act. Germany, the largest economy in Europe, is struggling with growth and some economists expect it to end 2024 in recession. German Q3 GDP is due on Wednesday and the forecast is for a 0.3% contraction versus the same period last year after stagnation in Q2.

The Eurozone as a whole is expected to grow moderately. Q3 GDP for the region is forecast to be 0.8% year over year, up from 0.6% previously. Any big divergence between Germany and the rest of the Eurozone will add to the worries about the region’s dependence on Germany and make the ECB’s decision more complicated.

Besides GDP, inflation numbers will also be watched. German and Spanish HICP preliminary data will give clues on inflation. German HICP is expected to be 2.1% year over year while Spanish inflation is expected to remain below 2%.

EUR/USD Technical Analysis: Key Levels

Trading at $1.07997 the EUR/USD is in a symmetrical triangle on the 2 hour chart. This is a consolidation phase, traders are waiting for a breakout to the upside or down to know the next direction. Symmetrical triangles are indecision patterns but a big move will happen once this range breaks.

The pivot is $1.08114. A break below this level will reinforce the bearish view and the pair will target support at $1.07869 and $1.07703. If these levels fail to hold the next target will be $1.07525 and the selling will intensify.

On the upside if the pair breaks above the pivot it will meet resistance at $1.08262, $1.08447 and $1.08642 each a cap on the upside.

EUR/USD Price Chart - Source: Tradingview

Indicators are mixed. The 50 day EMA is at $1.08055 and will apply pressure if the price doesn’t break above it. The RSI is at 51.99 and is neutral but slightly bearish. The RSI is saying the pair can go either way based on fundamental triggers (GDP or ECB comments).

In summary the symmetrical triangle in EUR/USD means volatility ahead and if the price stays below $1.08114 the bearish view will be preferred. Any up move will be temporary and substantial resistance levels will cap the gains unless the fundamentals change the market sentiment.

Key Insights:

  • ECB Rate Expectations: Potential for larger-than-expected rate cut as inflation concerns grow.

  • German GDP Data: Possible recession in Germany could weigh on the Euro.

  • Technical Levels: Bearish bias below $1.08114 pivot, with RSI indicating slight downside risk.

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ABOUT THE AUTHOR See More
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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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