Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1300.
- Add a stop-loss at 1.1600.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1600.
- Add a stop-loss at 1.1300.
The EUR/USD exchange rate continued its freefall as the US dollar index jumped as market risks rose. It dropped to 1.1480, its lowest level since August 1 this year.
Europeans and US Macro Data
The EUR/USD pair has been in a downward trajectory in the past few weeks, a trend that accelerated when the Federal Reserve and European Central Bank (ECB) delivered their interest rates decisions last week.
The two banks delivered diverging decisions. In Europe, the ECB decided to leave interest rates unchanged, with Christine Lagarde insisting that she was comfortable with the current situation. The bank has managed to bring inflation to the target of 2.0%, while the economy is showing some resilience.
The next key data from the European Union will be the upcoming European services and composite PMI numbers, which will provide more information about the health of the European economy. Economists see the flash services PMI moving from 51.6 in September to 52.6 in October.
The Federal Reserve, on the other hand, delivered its second consecutive interest rate cut in its meeting. However, this decision was described as a hawkish cut as officials hinted that a cut in December was not guaranteed.
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The next important EUR/USD pair will come from the United States, where ADP will publish the latest non-farm private payrolls data, which will help the Federal Reserve when making its interest rate decision in December. This report has become important now that there is an ongoing government shutdown.
The EUR/USD pair will also react to the upcoming Supreme Court hearing on Donald Trump's tariffs. A ruling against Trump would be positive for the market as it will potentially reduce inflation. However, Trump also has tools to impose tariffs even if he loses.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has been in a strong downward trend in the past few months as the US dollar index rebounded.
It has moved below the 23.7% Fibonacci Retracement level and the lower side of the symmetrical triangle pattern, a sign that bears have prevailed.
The Percentage Price Oscillator (PPO) indicator has continued falling. Therefore, the path of the least resistance for the pair is bearish, with the next key support to watch being at 1.14000, followed by the 38.2% retracement level at 1.1262.
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