The EUR/USD pair remains vulnerable near 1.0950 as the United States Dollar (USD) remains strong, while uncertainty over the Euro (EUR) outlook adds to the pressure. There is speculation that the European Central Bank (ECB) may cut interest rates again at its upcoming meeting on October 17 due to concerns about inflation stabilizing below the bank’s target of 2%.
The dovish bets on the ECB for October have been increasing as risks of inflation stabilization persist in the Eurozone. The annual Eurozone Harmonized Index of Consumer Prices (HICP) decelerated to 1.8% in September, below expectations. Additionally, the German economy, the largest in the Eurozone, is weak due to soft demand and is expected to shrink by 0.2% annually according to reports.
ECB policymaker François Villeroy de Galhau has also advocated for another interest rate cut this month, citing the need to prevent undershooting of the 2% inflation target. The economic data in the Eurozone has been mixed, with Retail Sales in August showing expansion but missing expectations.
In trading today, the Euro has performed strongly against the British Pound, but has had mixed results against other major currencies. The US Dollar remains firm against the Euro, staying close to its seven-week high. The positive labor market data released by the US for September has led to market expectations of a more gradual rate-cut approach by the Federal Reserve.
With the US Dollar gaining ground, EUR/USD struggles to make headway near the 1.0950 support level. The positive US employment report, showing resilient labor demand and wage growth, has tempered expectations for large rate cuts by the Fed. The upcoming US Consumer Price Index (CPI) data release will provide more clarity on the interest rate outlook.
From a technical analysis perspective, EUR/USD is facing pressure near the 1.0950 support level after breaking down from a Double Top chart pattern formation. The Relative Strength Index (RSI) indicates bearish momentum, with potential support near the 200-day Exponential Moving Average at 1.0900. Resistance levels are seen at the 20-day EMA at 1.1075 and the September high at 1.1200.
In conclusion, EUR/USD remains under pressure as the US Dollar continues to strengthen and uncertainty looms over the Eurozone economic outlook. The upcoming ECB meeting and US CPI data release will be crucial in determining the future direction of the currency pair. Traders are advised to monitor key levels and indicators for potential trading opportunities.
