- EUR/USD continues to decline, approaching 1.0850 as traders prepare for the ECB policy meeting.
- The ECB is anticipated to reduce its key borrowing rates by 25 basis points for the second consecutive meeting.
- Increasing speculation around Trump's potential victory has bolstered the US Dollar.
EUR/USD extends its losing streak into a fourth trading day on Thursday, falling to a more than 10-week low near 1.0850 as the US Dollar (USD) continues its strong performance. The US Dollar Index (DXY), which measures the Greenback against six major currencies, has surged to around 103.60, the highest level in over two months.
The USD remains robust as traders adjust expectations regarding significant rate cuts from the Federal Reserve (Fed) and increasingly speculate about a potential victory for former President Donald Trump in the upcoming presidential elections on November 5.
Market participants expect the Fed to implement moderate interest rate cuts for the remainder of the year, with fears of a US economic slowdown alleviated by solid growth in Nonfarm Payrolls (NFP) and Services Purchasing Managers’ Index (PMI) data for September.
Trump's anticipated victory over Democratic Vice President Kamala Harris is expected to lead to increased tariffs on imports from Asia and Europe, along with tax cuts and relaxed financial conditions that could further strengthen the US Dollar.
On the economic front, investors are focused on the US monthly Retail Sales data for September, set to be released at 12:30 GMT, with economists forecasting a growth of 0.3%.
Daily digest market movers: EUR/USD faces pressure from firm US Dollar
- EUR/USD continues to show weakness near 1.0850 on Thursday, encountering significant selling pressure ahead of the European Central Bank’s (ECB) interest rate decision, due at 12:15 GMT.
- Traders anticipate a further reduction in the ECB's Deposit Facility Rate by 49 basis points across the remaining two meetings of the year, as indicated by a note from Citi on Tuesday. This suggests two cuts of 25 basis points each, one today and another in December.
- A 25 basis point cut today would mark the second consecutive reduction, lowering the deposit facility rate to 3.25%. A dovish decision from the ECB is widely expected, as the Eurozone economy shows signs of slowing while price pressures remain manageable.
- With strong confidence in the ECB's plans to reduce interest rates again, investors will closely monitor the monetary policy statement and ECB President Christine Lagarde’s press conference for insights into potential actions in December.
- Lagarde is likely to discuss measures to revive economic growth, particularly as the Eurozone Harmonized Index of Consumer Prices (HICP) slowed to 1.7% in September, below expectations and the preliminary estimate of 1.8%. Recent projections from the German economic ministry also indicate a projected 0.2% decline in overall output by year’s end.
Technical Analysis: EUR/USD Declines to 1.0850
EUR/USD has slid further to around 1.0850 during European trading hours, continuing its decline after breaking below the 200-day Exponential Moving Average (EMA) at approximately 1.0900 earlier this week.
The downward movement began following a breakdown of the Double Top pattern on the daily timeframe near the September 11 low of around 1.1000, resulting in a bearish reversal.
The 14-day Relative Strength Index (RSI) has dropped below 30.00, indicating strong bearish momentum.
On the downside, the pair may find support around the psychological level of 1.0800 and an upward-sloping trendline at 1.0750, drawn from the October 3 low of about 1.0450. Meanwhile, the 200-day EMA and the key psychological level of 1.1000 will act as significant resistance points.
