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  • EUR/USD fell more than 4% in the third quarter.
  • That is the biggest quarterly drop since the second quarter of 2018.
  • The focus today is on the preliminary Eurozone inflation data for September.  

EUR/USD is operating on slippery grounds, having registered the biggest quarterly drop in over a year in the third quarter.  

The currency pair closed at 1.0885 on Monday, representing a 4.14% drop from July 1’s opening rate of 1.1360.  

That is the biggest quarterly decline since the second quarter of 2018. Back then, the common currency had dropped by 5.19%.  

The latest quarterly drop could be associated with the German recession fears and the dovish European Central Bank expectations. The central bank cut rates by 10 basis points to -0.50% last month and is scheduled to restart bond purchases from Nov. 1.  

Focus on Eurozone CPI

The Eurozone Consumer Price Index (CPI) scheduled for release at 09:00 GMT is expected to show the cost of living in the currency bloc rose 1% year-on-year in September.

Oil prices spiked in September due to an attack on Saudi oil facilities. As a result, the headline CPI may beat estimates. The rise in inflation due to transient factors like oil price rally is unlikely to deter the ECB from easing. Hence, an above-forecast CPI may not put a bid under the EUR.  

The common currency, however, could regain some poise if the core inflation number beats estimates.  

Apart from the Eurozone inflation data, the pair may also take cues from the final September Purchasing Managers’ Indices scheduled for release across the Eurozone.  

As of writing, the pair is trading at 1.0888. The technical bias is bearish with the 5- and 10-day moving averages trending south and the 14-day relative strength reporting a below-50 reading. Also, the daily chart is reporting a bearish lower highs, lower lows setup.  

Technical levels