EUR/USD Climbs to $1.0836: Will ECB Rate Cut Speculation Push the Euro Lower?

This is putting pressure on the Euro as market is expecting a bigger rate cut from the European Central Bank (ECB) in December. This ongoing economic uncertainty is causing volatility in the EUR/USD.

ECB Rate Cut Speculation Rises as Eurozone Activity Slows

The Euro is under pressure as market is expecting a big rate cut by the end of the year. The ECB has cut the Deposit Facility Rate 3 times in 2024, 25 basis points each time, to 3.25%. Now market is expecting 50 basis point cut in December.

$EURUSD ticks lower on the last day of the week, albeit it lacks any follow-through selling.
A softer tone around the US #bond yields undermines the #USD and supports the major.
Expectations for a less aggressive #Fed easing and more #ECB rate cuts should cap the upside.

— Chelton Wealth – Markets (@Xs2Chelton) October 25, 2024

ECB members like Mario Centeno of Portugal have been saying that inflation is below 2% for too long and more easing is needed. Centeno said bigger rate cut is possible and there are risks to growth in the Eurozone. These comments plus the weak PMI data has fueled speculation that the ECB will do more to stimulate the economy which will weigh on the Euro.

Data this week also showed better than expected German IFO Business Climate and Current Assessment for October. But business activity is still weak across the Eurozone so any positive data will not trigger a sustained move up in the Euro.

US Dollar and Fed Expectations Move EUR/USD

On the other side of the EUR/USD, the US Dollar is recovering as investors are confident that the Federal Reserve will be cautious with its policy. Recent data, NFP and Retail Sales for September and flash S&P Global PMI for October were better than expected. This means the economy is still growing in the US and the Fed will do gradual rate cuts.

And the 2024 US presidential election is also playing a role in the Dollar. Some market participants think that if Trump wins, the Dollar will get more support as his pro-business policies will influence the Fed’s policy.

Next up is the US Durable Goods Orders for September. Expectations are for -1% after flat in August. Any surprise in this data will move the EUR/USD and will be volatile in the coming days.

4/ The ECB delivered a third rate cut as inflation receded to 1.7% while the Eurozone economy has been slowing down.

The contrast with strong US economic data has led to a widening rate differential and big move down for EURUSD in October. pic.twitter.com/xWn0Sm7ABp

— Avantis (@avantisfi) October 24, 2024

EUR/USD Price Analysis: Technical Outlook

EUR/USD is currently trading at $1.0836, just below the immediate resistance level of $1.0845 after a recovery from its recent low of $1.0770.

The pair has broken above a descending trendline and is now testing the 50-period EMA at $1.0817, which serves as a key pivot point in the short term.

The price action suggests that if the pair holds above this level, there could be further upside potential.

The RSI is at 65.16, indicating slightly overbought conditions but with room for additional gains if bullish momentum continues. Immediate resistance is seen at $1.0845, and a break above this level could push the pair toward the next resistance levels at $1.0864 and $1.0885.

On the downside, immediate support is located at $1.0820, with further support at $1.0788 and $1.0770 if selling pressure intensifies. Traders should watch for a potential pullback if the pair fails to sustain above the $1.0820 pivot.

Summary: EUR/USD in Limbo as Rate Cut Speculation Grows

The Eurozone is weak and a bigger ECB rate cut is possible. The Euro is short term is facing challenges if the ECB will do more easing. The US Dollar is supported by good data and Fed expectations so the EUR/USD is under pressure.