(MENAFN- Daily Forex)
The EUR/USD exchange rate is poised to decline for the third consecutive day, driven by a decline in September's Eurozone inflation figures and diverging communications between global central banks. The EUR/USD pair has lost ground, reaching the nearest support level of 1.1045, threatening to break below the crucial 1.1000 level. The pair had previously surrendered its strong gains at the end of last month, reaching a resistance level of 1.1214, at which point we recommended selling the pair, a recommendation that proved highly successful.
According to the results of the economic calendar, the inflation rate in the Eurozone reached 1.8% year-on-year in September, down from 2.2% in August, and is now comfortably below the European Central Bank's target of 2.0%. Core inflation, which is a major concern for the ECB, fell to 2.7% from 2.8%. furthermore, the decline in September's inflation figures increases the likelihood of an October rate cut by the European Central Bank and a large 50bp move in either October or December.
Commenting on the performance and influencing factors, Joe Touky, Head of Forex Analysis at Argentus, stated that annual inflation at 1.8% was in line with expectations and did nothing to change the current cautious outlook for European monetary policy. The EUR/USD pair remains weaker, capped by strong technical resistance at 1.12, and is heading towards technical chart support at 1.1015.
In an appearance before European lawmakers on Monday, ECB President Christine Lagarde indicated that an October rate cut was on the table because she was comfortable with the idea that inflation was now clearly on the downside and that upside risks were fading. Last week, the ECB was expected to cut rates again in December, opting to continue with a quarterly pace of rate cuts. Nevertheless, those expectations were undermined by the release of weak French and Spanish inflation data on Friday, which suggested today's figure would surprise to the downside.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money
Francesco Pesole, a forex analyst at ING Bank, said that the swap rate continued to widen in favor of the US dollar, now at around -110 basis points, about 25 basis points below mid-September levels of -85 basis points. He added, "The idea that an inflation-concerned ECB will move more cautiously than the Fed on easing is falling apart. It seems increasingly likely that keeping rates on hold in October could mean a 50-basis point cut in December, which explains the market's pricing of -52 basis points by year-end, with 22 basis points priced in for this month."
While ECB President Lagarde was encouraging financial markets to bet on a faster pace of rate cuts, her counterpart at the Fed indicated a rejection of expectations for another 50-basis point cut in 2024. Jerome Powell was clear that he believed two more 25 basis point moves were sufficient, which is less than the 70 basis points currently expected by the market/USD Technical analysis and forecast:
According to the analyst, the large moves in short-term interest rate differentials between the EUR and the USD are pointing to weakness in the EUR/USD pair now. Consequently, we believe that the EUR/USD pair could trade again below the 1.110 level in the next couple of days, testing the 1.100 level if the US unemployment rate does not rise on Friday.
According to reliable trading platforms, the EUR/USD pair continues to face downward pressure as the US dollar (USD) rises, following lower expectations of a large rate cut by the US Federal Reserve (Fed) in November. The US Dollar Index (DXY), which tracks the US dollar against six major currencies, rose above 101.00. According to the CME FedWatch tool, the probability of a 50-basis point rate cut by the Fed in November has fallen to 35.3%, down from 58% just a week ago.
Recent statements by Federal Reserve Chair Jerome Powell at the National Association for Business Economics conference played a key role in calming market expectations for a significant rate cut. Powell indicated that the Fed is likely to cut US interest rates by 25 basis points in both of the remaining meetings this year, resulting in a cumulative cut of 50 basis points. Powell's comments emphasized a cautious approach, balancing inflation control with economic stability. However, some Fed officials, such as Atlanta Fed President Raphael Bostic, still support a more aggressive 50 basis point cut if labor market data shows signs of weakness. This places more attention on upcoming US jobs reports, including the ADP employment change data and the September non-farm payrolls data, scheduled to be released on Wednesday and Friday, respectively.
Ready to trade our EUR/USD
daily forecast ? We've shortlisted the best forex broker list for you to check out.
MENAFN02102024000131011023ID1108740480
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.