- EUR/USD remains fragile near 1.0850 as the ECB lowers the Rate on the Deposit Facility by 25 bps to 3.25%.
- The ECB is expected to cut its key borrowing rates by 25 bps again in December.
- Growing speculation for Trump’s victory has strengthened the US Dollar.
EUR/USD slides further to near 1.0810 on Thursday. The major currency pair weakens after dovish comments from European Central Bank (ECB) President Christine Lagarde in her press conference after the policy decision. The ECB reduced its Rate on Deposit Facility by 25 basis points (bps) to 3.25%, as expected. Similarly, the Main Refinancing Operations Rate was reduced by 25 bps to 3.4%. This was the second 25 bps interest rate cut by the ECB in a row.
The comments from ECB Lagarde indicated that price pressures in the Eurozone seem under control, while officials are more focused on preventing economic growth. The Eurozone Harmonized Index of Consumer Prices (HICP) has decelerated to 1.7% in September, faster than expectations and the preliminary estimate of 1.8%, according to revised estimates. The latest economic projections from the German economic ministry showed that the nation is expected to conclude the year with a decline in the overall output by 0.2%.
When asked about the likely interest rate action in December, Christine Lagarde refrained from committing to any pre-defined rate cut path and decisions will be based on the incoming data.
Daily digest market movers: EUR/USD weakens on multiple headwinds
- EUR/USD extends its losing streak for the fourth trading day on Thursday. The major currency pair declines to a more than 10-week low near 1.0810 as the US Dollar (USD)extends its upside. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, jumps to near 103.90, the highest level seen in over two months.
- The Greenback strengthens on upbeat United States (US) monthly Retail Sales and lower Initial Jobless Claims for the week ending October 11. The Retail Sales data, a key measure of consumer spending, rose by 0.4%, faster than estimates of 0.3% and the former release of 0.1%. Meanwhile, individuals claiming jobless benefits for the first time came in lower at 241K than estimates of 260K.
- The US Dollar was already upbeat as traders priced out expectations of the continuation of hefty rate cuts from the Federal Reserve (Fed) and growing speculation of former US President Donald Trump’s victory in presidential elections, scheduled on November 5.
- Market participants expect the Fed to cut interest rates moderately in the remainder of the year as fears of a United States (US) economic slowdown have been subsided by robust growth in the Nonfarm Payrolls (NFP) and the Services 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 peers, tax cuts, and loosening financial conditions that will benefit the US Dollar.
Technical Analysis: EUR/USD falls to near 1.0800
EUR/USD slides inch closer to near 1.0800 in early North American trading hours. The major currency pair extends its downfall after breaking below the 200-day Exponential Moving Average (EMA), which trades around 1.0900, earlier this week.
The downside move in the shared currency pair started after a breakdown of the Double Top formation on a daily timeframe near the September 11 low at around 1.1000, which resulted in a bearish reversal.
The 14-day Relative Strength Index (RSI) dives below 30.00, indicating a strong bearish momentum.
On the downside, the major could find support near the round-level figure of 1.0800 and upward-sloping trendline at 1.0750, which is plotted from the October 3 low around 1.0450. Meanwhile, the 200-day EMA and the psychological figure of 1.1000 will be the key resistances for the pair.
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