- EUR/USD edges higher toward 1.0830, though downside risks remain amid several headwinds.
- Traders anticipate a substantial interest rate cut from the ECB in December.
- The Fed is expected to adopt a gradual approach to its rate-cut cycle.
EUR/USD extends its recovery toward 1.0830 during Friday’s North American session, supported by a pullback in the US Dollar (USD). The US Dollar Index (DXY), which tracks the USD against six major currencies, dips just below 104.00, pressured by a steady 0.8% decline in US Durable Goods Orders for September, a slight improvement over the anticipated 1.0% drop.
Despite this, the USD retains near-term strength due to multiple factors, including increased expectations for a gradual rate-cut path from the Federal Reserve (Fed) and rising speculation about former President Donald Trump’s potential win over Vice President Kamala Harris in the upcoming presidential race. Confidence in the Fed’s moderated easing strategy is bolstered by positive Nonfarm Payrolls (NFP), Retail Sales data for September, and better-than-expected October PMI data, underscoring resilient economic growth.
Daily Digest Market Movers: EUR/USD Shaped by ECB Rate-Cut Expectations for December
- Eurozone Economic Activity: The Euro remains steady after Thursday’s HCOB Eurozone PMI release, which showed ongoing contraction in Eurozone business activity. The flash Composite PMI fell to 49.7 in October, reflecting prolonged contraction in manufacturing and slower-than-expected growth in services.
- ECB Rate Cut Speculation: Increasing talk of a substantial rate cut from the ECB in December may weigh on the Euro. Policymaker comments suggest that a 50 bps reduction is possible, reflecting concerns over low inflation and growth risks.
- German Business Sentiment: Germany’s IFO Business Climate, Current Assessment, and Expectations indices outperformed forecasts, hinting at a potential economic upturn, though weak business activity remains a challenge to broader recovery.
Technical Analysis: EUR/USD Eyes Stability Above 1.0800
EUR/USD holds steady above 1.0800 in North American trading, though its broader outlook remains cautious as it stays below the 200-day Exponential Moving Average (EMA), currently around 1.0900. The recent bearish momentum began after a breakdown from a Double Top formation near the September 11 low at around 1.1000, signaling a downward reversal.
The 14-day Relative Strength Index (RSI) remains in the 20.00-40.00 range, highlighting strong bearish momentum, though a recovery is possible as conditions approach oversold territory.
On the downside, a slip below the upward-sloping trendline from the October 3 low around 1.0450, now at 1.0750, could open the door for further declines toward the 1.0700 support. Key resistance levels lie at the 200-day EMA near 1.0900, with the psychological 1.1000 mark as the next major hurdle.
