Fundamental Overview
It looks like the market is taking some breather after an incredible rally in the US Dollar. This week was pretty empty on the data front, and we haven’t got any meaningful catalyst. The main culprit for the US Dollar strength has been the rally in long term Treasury yields.
The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations. There’s been a good argument that the markets have been already positioning for a Trump victory which is expected to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend and it’s generally a bad idea to fight such trends without a strong catalyst. Unfortunately, we don’t have much left for October as the main events will be in the first weeks of November when we will get the top tier economic reports, the US elections and the FOMC decision.
On the EUR side, the ECB last week cut interest rates by 25 bps as expected but didn’t offer anything new in terms of forward guidance as the central bank remains data dependent and it’s not pre-committing to a particular rate path.
The market is pricing an 83% chance of another 25 bps cut in December with 17% probabilities of a larger 50 bps cut. Further ahead, the market sees the ECB cutting four more times in 2025.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD bounced off of the key swing level at 1.0777 as the buyers stepped in with a defined risk below the level to position for a pullback into the 1.10 handle. The sellers will want to see the price breaking lower to increase the bearish bets into the 1.06 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have the downward trendline defining the current bearish momentum. The sellers will likely keep on leaning on it to position for new lows, while the buyers will want to see the price breaking higher to increase the bullish bets into the 1.10 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is trading right around the trendline now. There’s not much we can add here as the sellers will look for a rejection, while the buyers will look for a breakout to the upside. The red lines define the average daily range for today.
