The European Central Bank (ECB) is set to meet tomorrow, and there are expectations of a 25 basis point cut in interest rates. This has put pressure on the EURUSD pair, which has dropped below its 200-day moving average for the first time since August 2. Currently trading at 1.08660, sellers are in control as the currency pair hovers near its lowest level in months.
As traders anticipate the ECB rate decision, there is uncertainty about whether there will be a bounce-back rally or if sellers will continue to push the price lower. Some are looking at key support levels from the end of July and early August at 1.08248 and 1.07775, respectively. A more conservative stop level is now seen between 1.0899 and 1.09125, where a bounce-back corrective high was rejected earlier today.
Goldman Sachs has a cautious outlook on the euro, noting that the ECB is unlikely to provide more explicit forward guidance despite the expected rate cut. Policymakers may need strong data to support further cuts, making it harder for the euro to depreciate significantly. While there is potential for the ECB to adopt a more proactive stance and weaken the euro against the US dollar, this scenario is not expected in the near term.
For traders looking to buy the EURUSD pair, it may be wise to wait for a rotation back above the 200-day moving average. With the current break below this key technical level, there is little incentive for buyers to enter the market. Goldman Sachs recommends trading the euro on the funding side, but warns that simply speeding up the rate of depreciation is not enough to guarantee substantial weakening of the EURUSD pair.
In conclusion, the EURUSD pair is facing downward pressure ahead of the ECB meeting, with sellers in control as the price dips below the 200-day moving average. Traders are advised to exercise caution and wait for clear technical signals before making any trading decisions in this volatile market.
