- EUR/USD extends its decline to near 1.0850 as investors prepare for the ECB policy meeting.
- The ECB is expected to cut its key interest rates by 25 basis points for the second meeting in a row.
- Growing speculation about Trump’s victory strengthened the US dollar.
On Thursday, EUR/USD shows weakness near 1.0850. The major currency pair is under ponderous selling pressure ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 12:15 GMT.
Investors expect the ECB to further cut its deposit rate by 49 basis points (bps) at the remaining two meetings in the coming months, according to Citi’s note on Tuesday, which suggests that Thursday and the second rate cut of 49 basis points (bps) will see this year in December.
Thursday’s quarter-to-percent rate cut will be the second in a row, pushing the deposit rate down to 3.25%. A dovish ECB decision is widely expected as the eurozone economy appears to be on the path of economic slowdown and price pressures appear to be under control.
With high confidence in the ECB that it will cut interest rates again, investors will be closely following the monetary policy statement and press conference of ECB President Christine Lagarde for modern information on likely monetary policy actions in December.
Christine Lagarde is expected to talk more about reviving economic growth after preliminary estimates showed the euro zone’s Harmonized Index of Consumer Prices (HICP) falling to 1.8% in September. The latest economic forecasts from Germany’s economy ministry showed that the country was expected to end the year with a 0.2% decline in overall output.
Daily summary of market changes: EUR/USD is weakening under the influence of many opposing factors
- On Thursday, EUR/USD extends its losing streak for the fourth trading day. The major currency pair fell to a more than 10-week low near 1.0850 amid mighty gains in the US dollar (USD) over the past few weeks. The U.S. Dollar Index (DXY), which measures the dollar’s value against six major currencies, rose to nearly 103.60, its highest level in more than two months.
- The dollar remains stable as investors priced in expectations for continued significant interest rate cuts by the Federal Reserve (Fed) and growing speculation about former US President Donald Trump’s victory in the November 5 presidential election.
- Market participants expect the Fed to moderate interest rates during the remainder of the year as fears of an economic slowdown in the United States (US) were allayed by mighty gains in the nonfarm payrolls (NFP) and the Purchasing Managers’ Index (PMI). data for September.
- Meanwhile, Trump’s victory over Democratic Vice President Kamala Harris is expected to result in higher tariffs on imports from Asian and European countries, tax cuts and looser financial conditions, which will benefit the US dollar.
- On the economic front, investors’ attention will focus on monthly US retail sales data for September, which will be released at 12:30 GMT. Economists expect retail sales to grow by 0.3%.
Technical analysis: EUR/USD weakens to 1.0850
EUR/USD falls further towards 1.0850 during European trading hours. The major currency pair continues its decline after breaking below the 200-day exponential moving average (EMA), which is hovering around 1.0900, earlier this week.
The downward move on the common currency pair began after the Double Top formation was broken on the daily time frame near the September 11 minimum at around 1.1000, which resulted in a reversal of the downward trend.
The 14-day relative strength index (RSI) is falling below 30.00, indicating a mighty downtrend.
On the other hand, the main rate may find support near the round level of 1.0800 and the rising trend line at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the key resistances for the pair will be the 200-day EMA and the psychological number 1.1000.
