EUR/USD Outlook Hinges on ECB Interest Rate Decision

Article By: ,  Strategist

US Dollar Outlook: EUR/USD

EUR/USD may consolidate ahead of the European Central Bank (ECB) interest rate decision on October 17 as the exchange rate holds above the weekly low (1.0900) to pull the Relative Strength Index (RSI) away from oversold territory.

EUR/USD Outlook Hinges on ECB Interest Rate Decision

The selloff from the start of October seems to be stalling as EUR/USD struggles to extend the series of lower highs and lows from earlier this week, but developments coming out of the ECB meeting may produce headwinds for the Euro as the central bank is expected to deliver another 25bp rate cut.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

Euro Area Economic Calendar

 

The ECB is anticipated to lower interest rates for the third time this year as the Euro Area Consumer Price Index (CPI) falls below 2% for the first time since 2021, and the Governing Council may continue to shift gears in the months ahead as President Christine Lagarde and Co. pledge to ‘follow a data dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.’

With that said, EUR/USD may continue to give back the advance from the August low (1.0778) as the ECB further unwinds its restrictive policy, but a hawkish rate cut may prop up the exchange rate as the Governing Council pursues a more gradual approach than its US counterpart in adjusting monetary policy.

EUR/USD Chart – Daily

Chart Prepared by David Song, Strategist; EUR/USD on TradingView

  • Keep in mind, EUR/USD pushed below the September low (1.1002) after failing to hold above the 50-Day SMA (1.1059), and the weakness in the exchange rate may persist as it no longer tracks the positive slope in the moving average.
  • A break/close below the 1.0860 (50% Fibonacci retracement) and 1.0880 (23.6% Fibonacci extension) region may push EUR/USD towards the August low (1.0778), with the next area of interest coming in around 1.0770 (38.2% Fibonacci retracement).
  • Nevertheless, EUR/USD may attempt to retrace the decline from the start of the month as it no longer carves a series of lower highs and lows but need a close above the 1.0940 (50% Fibonacci retracement) to 1.0960 (61.8% Fibonacci retracement) area to bring the 1.1070 (23.6% Fibonacci retracement) to 1.1100 (78.6% Fibonacci retracement) zone back on the radar.

Additional Market Outlooks

Gold Price Forecast: Bullion Breaks Out of Bull Flag Formation

USD/CAD Rally Pushes RSI Up Against Overbought Zone

Australian Dollar Forecast: AUD/USD Bearish Price Series Persists

USD/JPY Defends Post-NFP Reaction with CPI Report in Focus

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2024