The European Central Bank (ECB) Governors Simkus and Kazaks are making dovish comments that support market expectations for a further reduction in ECB rates in December. Shaun Osborne, Scotiabank’s Chief FX Strategist, notes that there is little appetite for large rate cuts, suggesting that market expectations may be a bit stretched with a 32bps reduction already priced in for December. While the EUR/USD is likely to remain under pressure in the short term, bargain hunters may become more active around the 1.08 level.
The EUR has been capped by the 200-day MA in the upper 1.08s, indicating strong resistance at this level. Despite a decent rebound in the EUR last week, it does not signal a reversal in its recent downward trend. The sell-off appears over-extended based on intraday and daily oscillators, but there is a firm cap at 1.0872 where the 200-day MA currently sits. Any minor gains from Thursday’s low are seen as corrective before renewed losses, with strong support at 1.0780/00 and potential weakness below targeting 1.0650/00.
Overall, the EUR/USD is expected to continue facing pressure in the short term, but there may be opportunities for bargain hunters around the 1.08 level. The ECB’s dovish comments and market expectations for a rate cut in December are driving market sentiment. Despite the EUR’s recent rebound, the overall trend remains bearish, with strong resistance at the 200-day MA. Traders are advised to monitor support levels at 1.0780/00 and potential weakness below targeting 1.0650/00.
In conclusion, the EUR/USD is likely to remain under pressure in the near future, with the potential for a further reduction in ECB rates in December. Traders should be cautious of a firm cap at the 200-day MA in the upper 1.08s and monitor support levels for potential weakness. Bargain hunters may become more active around the 1.08 level, but the overall trend remains bearish for the EUR. ECB Governors’ comments and market expectations are driving market sentiment, with a focus on potential rate cuts in December.
