EURUD to Head Lower on ECB Negative Rates Comments, After Failure to Hold Above 1.06

EURUSD climbed above 1.06 earlier, but failed to hold above this level and reversed lower in the European session, pointing to a fall below 1.05, after comments from ECB’s Panetta mentioning negative rates.

After failing to sustain gains above 1.12 at the end of September, the euro has experienced a sharp decline, losing 7 cents and falling below 1.05 last week, marking its lowest level since October 2023. The U.S. dollar has strengthened over the past two months, supported by a cautious Federal Reserve stance on rate cuts, robust economic data such as today’s positive housing numbers, a Republican victory in the U.S. elections, and a jump in October’s U.S. CPI inflation.

EUR/USD Chart H4 – The Resistance Zone Is Holding at 1.06

Meanwhile, comments from Panetta today highlighted the Eurozone’s continued economic sluggishness and reaffirmed the European Central Bank’s dovish position, keeping pressure on the EUR/USD pair. The inability of EUR/USD to maintain gains above 1.06 underscores the ongoing downward momentum. If the key support at 1.05 fails to hold, the next target for sellers would likely be the 1.0440 zone.

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Remarks by ECB Executive Board Member Fabio Panetta

• The Eurozone is still far from the neutral interest rate level.
• The ECB should aim for a neutral monetary policy stance and may even adopt an expansionary policy if needed.
• Weak domestic demand could push inflation well below the 2% target.
• Current economic activity in the Eurozone remains sluggish, with no recovery in the manufacturing sector.
• The tightening bias in the ECB’s monetary policy description is no longer warranted.
• A forward-looking, traditional monetary policy approach is necessary.
• Directional guidance from the ECB would support consumption and investment.
• The ECB should offer clearer indications of its rate policy intentions.
• It is plausible for rates to drop below neutral levels.
• Changes in the U.S. government add uncertainty to the global inflation outlook.

EUR/USD Live Chart