- Economists believe that the European Central Bank will cut rates in October and December.
- Eurozone inflation fell below 2% in September.
- Traders will go through the minutes of the Fed meeting.
EUR/USD price analysis points to a continued decline as market participants price in more interest rate cuts from the European Central Bank this year. At the same time, the dollar paused after rallying to a seven-week high on a strong US labor market report.
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Most economists polled by Reuters on Tuesday believe the European Central Bank will cut rates in October and December. During both meetings, the central bank could implement a reduction of 25 basis points.
The new forecast is a shift from a month ago when they expected another rate cut in December. Notably, eurozone inflation fell below 2% in September, giving policymakers confidence that the fight is almost over. As a result, ECB President Christine Lagarde has hinted at another rate cut in October. Lower borrowing costs will weigh on the euro, especially as the US economy remains resilient, boosting the dollar.
On Wednesday, the dollar jumped sideways after climbing to new highs. The recent rally followed better-than-expected non-farm payrolls reports. Initially, the Fed implemented a significant rate cut, fearing a deterioration in the labor market. Accordingly, traders expected a similar rate cut in November and this weighed on the dollar.
However, monthly employment data show strong job growth and a lower unemployment rate. As a result, expectations changed to reflect an 86% chance of a 25 bps rate cut in November.
Later in the day, traders will go through the minutes of the Fed meeting, which may contain clues regarding future moves. Moreover, Thursday’s US CPI report will show whether the central bank is winning the fight against inflation.
EUR/USD key events today
Technical analysis of EUR/USD prices: Bears are looking for new lows
On the technical side, the EUR/USD price is challenging the 1.0950 support level for the second time. It is trading well below the 30-SMA, with the RSI near the oversold region, supporting the 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 looking for new lows. However, the RSI has made a bullish divergence, indicating a weakening bearish momentum. Therefore, EUR/USD could recover if the bears do not regain momentum.
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