The EUR/USD currency pair is trading near a fresh 11-week low, hovering close to the key support level of 1.0800 in Tuesday’s European session. The pair is facing pressure from several factors, including increasing dovish sentiment surrounding the European Central Bank (ECB) and a resilient U.S. Dollar (USD).
Traders are anticipating another interest rate cut from the ECB in its December meeting, as concerns over Eurozone economic growth are expected to keep inflation close to the central bank‘s target of 2%. This would mark the fourth interest rate reduction by the ECB this year.
Recent data revealed a 1.4% year-over-year decline in the German Producer Price Index (PPI) for September, surpassing the 0.8% drop in August. This suggests producers are struggling to raise prices for goods and services amid weakened household spending.
Peter Kazimir, head of the Slovak central bank and ECB policymaker, expressed growing confidence in the ongoing disinflation trend but indicated a need for more evidence before claiming victory over inflation. In contrast, Gediminas Šimkus, Governor of Lithuania’s central bank and ECB Governing Council member, adopted a more dovish stance, stating that entrenched disinflation could lead to interest rates falling below the “natural level” of 2% to 3%.
Attention is also focused on ECB President Christine Lagarde’s interview with Bloomberg and her participation in a panel discussion at the International Monetary Fund (IMF) meeting in Washington, where she is expected to provide further insights into interest rate policy.
As the EUR/USD pair remains fragile near 1.0800, the USD continues to strengthen, with the U.S. Dollar Index (DXY) holding gains near 104.00. The greenback’s rise is fueled by uncertainties surrounding the upcoming U.S. presidential elections and expectations that the Federal Reserve will adopt a moderate approach to rate cuts.
Recent polls indicate a tight race between former President Donald Trump and Vice President Kamala Harris, with Trump’s potential victory expected to result in higher import tariffs and lower taxes, which could influence the Fed to raise interest rates. The CME FedWatch tool currently projects a 25-basis-point rate cut in November and December.
Market participants are also eyeing the preliminary S&P Global Purchasing Managers Index (PMI) data for October, set for release on Thursday.
Technical Analysis: EUR/USD Faces Uncertainty Below 1.0850
The EUR/USD pair struggles to maintain support at 1.0800 during European trading. The outlook for the major currency pair remains unclear as it trades below the 200-day Exponential Moving Average (EMA) around 1.0900.
The recent downturn began with a breakdown of a Double Top formation on the daily chart near the September 11 low at approximately 1.1000, leading to a bearish reversal. The 14-day Relative Strength Index (RSI) has dipped below 30, indicating strong bearish momentum; however, a potential recovery remains plausible as conditions become oversold.
On the downside, support may be found near an upward-sloping trendline at 1.0750, drawn from the October 3 low of about 1.0450. Resistance levels for the pair are identified at the 200-day EMA and the psychological barrier of 1.1000.
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