The EUR/USD pair continues to decline, reaching a 10-week low of 1.0850 as the US Dollar gains strength. The US Dollar Index (DXY) rises to its highest level in over two months, reflecting the Greenback’s firmness in the market. This is driven by expectations of less aggressive rate cuts from the Federal Reserve and speculations of Donald Trump’s victory in the upcoming presidential elections.
Market participants anticipate moderate interest rate cuts from the Fed for the remainder of the year, citing strong economic indicators such as robust growth in Nonfarm Payrolls and Services PMI data. Additionally, a potential Trump victory is seen as beneficial for the US Dollar due to his proposed policies on tariffs, tax cuts, and financial conditions that could support the currency.
Investors are closely monitoring the US monthly Retail Sales data for September, expecting a 0.3% growth. The upcoming European Central Bank (ECB) interest rate decision is also a key focus, with expectations of a 25 bps rate cut. ECB President Christine Lagarde’s press conference following the decision will provide further insights into the future monetary policy direction.
Technical analysis shows EUR/USD declining to 1.0850 after breaking below the 200-day EMA and a Double Top formation. The RSI indicates strong bearish momentum, with potential support levels at 1.0800 and 1.0750. Resistance levels include the 200-day EMA and 1.1000.
The ECB Rate On Deposit Facility is a key indicator to watch, as it reflects the rate at which banks earn interest when depositing funds with the ECB. The next release is scheduled for October 17, 2024, with a consensus expectation of 3.25%. This rate decision will impact market sentiment towards the Euro and the overall economic outlook.
In conclusion, the EUR/USD pair faces downward pressure due to the strength of the US Dollar and expectations of monetary policy actions from both the Fed and the ECB. Traders are monitoring key economic indicators and political developments to gauge the future direction of the currency pair. With uncertainties surrounding the upcoming US elections and economic data releases, volatility in the forex market is expected to persist in the near term.
