- Economists believe the European Central Bank will cut rates in October and December.
- Eurozone inflation fell below 2% in September.
- Traders will go through the Fed’s meeting minutes.
The EUR/USD price analysis indicates a continuing slump as market participants price more European Central Bank rate cuts for this year. At the same time, the dollar paused after rallying to a seven-week high due to a robust US labor market report.
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A majority of economists polled by Reuters on Tuesday believe the European Central Bank will cut rates in October and December. During both meetings, the central bank might implement 25-bps cuts.
The new forecast is a shift from a month ago when they expected one more rate cut in December. Notably, Eurozone inflation fell below 2% in September, giving policymakers confidence that the fight was nearly over. As a result, ECB president Christine Lagarde hinted at another rate cut in October. Lower borrowing costs will weigh on the euro, especially since the US economy remains resilient, boosting the dollar.
On Wednesday, the dollar drifted sideways after climbing to new peaks. The recent rally followed a better-than-expected nonfarm payrolls report. Initially, the Fed had implemented a significant rate cut, fearing deterioration in the labor market. Consequently, traders expected a similar rate cut in November and it weighed on the dollar.
However, the monthly employment figures showed robust job growth and a softer unemployment rate. As a result, expectations shifted to reflect an 86% chance of a 25-bps rate cut in November.
Later in the day, traders will go through the Fed’s meeting minutes, which might contain clues regarding future moves. Furthermore, the US CPI report on Thursday will show whether the central bank is winning its battle against inflation.
EUR/USD key events today
- FOMC Meeting Minutes
EUR/USD technical price analysis: Bears seek new lows
On the technical side, the EUR/USD price is challenging the 1.0950 support level a second time. It trades well below the 30-SMA, with the RSI near the oversold region, supporting a bearish bias.
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Bears recently broke below the 1.1000 support level with a solid candle. The price then pulled back to retest the level and is now seeking new lows. However, the RSI has made a bullish divergence, indicating fading bearish momentum. Therefore, EUR/USD might rebound if bears do not regain momentum.
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