- The Federal Reserve might start interest rate cuts by the first half of next year.
- The euro has gained around 3.4%, marking its most significant monthly increase in a year.
- Data revealed a more substantial than expected drop in US new home sales in October.
Tuesday witnessed a bullish EUR/USD price analysis as the US dollar tumbled to a three-month low against major currencies, setting the stage for its most significant monthly plunge in a year. Notably, this decline came amid expectations that the Fed might start interest rate cuts by the first half of the upcoming year.
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Moreover, the increased likelihood of earlier rate cuts by the Fed in 2024, compared to the European Central Bank, is putting pressure on the dollar today.
Meanwhile, market pricing indicates a 23% chance that the Fed could begin easing monetary policy as early as March. At the same time, investors are closely monitoring various events and data this week. Over the month, the euro has gained around 3.4%, marking its most significant monthly increase in a year.
On Monday, the dollar sustained losses following data revealing a more substantial than expected drop in US new home sales. The value dropped by 5.6% to a seasonally adjusted annual rate of 679,000 units. Meanwhile, September’s sales were revised lower to 719,000 units from the previously reported 759,000 units.
Therefore, there is little potential for a turnaround in the dollar. However, later this week, Q3 GDP numbers will come out. If the US economy can demonstrate sustained growth, we could witness a reversal and some dollar strength to end the month.
EUR/USD key events today
- US CB consumer confidence for November
EUR/USD technical price analysis: Euro bulls face a tough test at 1.0950
Euro bulls are still struggling at the 1.0950 resistance level. Meanwhile, the RSI still shows weakness in the uptrend that might lead to a reversal. If bulls fail to make a higher high by breaking above 1.0950, the trend will likely pause to consolidate or reverse to the downside.
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Bears can take control if the price goes below 30-SMA. However, to reverse the trend, they would need to start making lower lows by breaking below the 1.0851 support level. Still, there is a chance the bulls will regain momentum. The price will likely take out the 1.1000 resistance in such a case.
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