Key Support Levels
Support 1: 1.0825, the recent 4-hour chart swing low
Support 2: 1.0780, a daily chart swing low and trendline support
Support 3: 1.0674, a daily chart swing low and trendline support
Key Resistance Levels
Resistance 1: 1.1001, a 4-hour chart key support and resistance level
Resistance 2: 1.0950, a daily chart range resistance level
Resistance 3: 1.0900, a recent 4-hour support turned resistance level
EUR/USD Fundamental Analysis
All signs point South for the EUR/USD pair on the fundamental side. The European Central Bank meeting weighed on the pair since the central bank lowered borrowing costs by 25-bps. Economists initially expected the central bank to cut rates in September and October. However, the economic scene shifted, leading to an increase in rate-cut expectations.
The Eurozone economy has slowed down significantly, with data on business activity weighing on the euro. At the same time, inflation has dropped to 1.8%, below the central bank’s target. Most major central banks are more focused on preserving growth after a period of high interest rates. Furthermore, keeping inflation at healthy levels is essential.
Consequently, Lagarde started hinting at a possible cut in October. However, during the meeting on Thursday, she failed to give guidance on the future. Nevertheless, analysts believe the central bank will implement a third cut in December. Consequently, markets are pricing a total of 29-bps by the end of this year. Still, it will depend on incoming data.
Elsewhere, the EUR/USD has trended lower due to a stronger dollar. A combination of upbeat US data and increased bets for a Trump win have supported the greenback. Markets are now pricing a gradual pace for rate cuts in the US. Furthermore, a Trump win could bring back inflation, pausing rate cuts.
Final Thoughts
The EUR/USD pair is on a clear downtrend, with the European Central Bank cutting interest rates. The Eurozone economy has slowed significantly, and inflation is below the central bank’s targets. Furthermore, a strong dollar is putting downward pressure, creating a bleak outlook. The pair will likely continue declining if these factors remain in play.
This article is brought to you by FXGT.com. If you want to dive deep into forex, stocks, commodities, and cryptos, FXGT.com market analysis provides expert analysis that filters market noise and reveals what matters most.
Read More: EUR/USD: ECB Lowers Rates, Markets Bet on December Cut