The EUR/USD pair has dropped to 1.1027, hitting a three-week low due to expectations of the European Central Bank (ECB) continuing to ease monetary policy. This decision is driven by slow economic growth and inflation rates below the ECB’s 2% target in the Eurozone.
Recent data shows a decrease in the Eurozone’s annual Consumer Price Index to 1.8% in September, the lowest since April 2021 and below the expected 1.9%. Core inflation also fell to 2.7% year-on-year from 2.8%, contrary to predictions of remaining stable. These lower-than-expected inflation numbers increase the chances of a rate cut at the next ECB meeting in October, making it the third reduction in borrowing costs this year. There is a 95% probability in the market for a 25-basis-point cut.
Strong statistics from the US services sector have added pressure to the EUR/USD exchange rate, contributing to the euro’s challenges.
The focus now shifts to the US job market reports, including the unemployment rate, Nonfarm Payrolls (NFP), and average wages, which could impact the pair’s movements further.
In terms of technical analysis, the EUR/USD pair is expected to decline to 1.0982 after reaching a corrective rise to 1.1039. The next potential moves include a correction to 1.1066 before another downward wave to 1.0966. The MACD indicator supports this bearish outlook, with its signal line below zero and trending downwards.
On the hourly chart, the EUR/USD is progressing in its third wave of decline towards 1.0982. A consolidation range around 1.1046 was formed, leading to a local target at 1.1008 with a downward exit. A corrective move up to 1.1045 is anticipated, followed by a continued decline to 1.0982. The Stochastic oscillator also supports this bearish scenario, with its signal line below 50 and moving towards 20.
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