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EUR/USD gives back the rebound following the lackluster U.S. Non-Farm Payrolls (NFP) report even as European Central Bank (ECB) officials soften their dovish tone, and recent price action keeps the downside targets on the radar as the exchange rate initiates another series of lower highs & lows.

Even though the ECB remains in no rush to remove the zero interest rate policy (ZIRP), there appears to be a growing rift within the central bank as Governing Council member Klaas Knot argues that the ‘if our baseline scenario is confirmed in the next few months, we might think again about the pace of our normalization and might not have to wait that long.’

The comments suggest the ECB will alter the forward-guidance ahead of 2019 as the quantitative easing (QE) program is set to expire in December, and a material adjustment in the monetary policy outlook should heighten the appeal of the Euro as the central bank prepares to move away from accommodative stance.

Image of fed fund futures

Until then, EUR/USD remains vulnerable to further losses especially as the Federal Open Market Committee (FOMC) continues to prepare U.S. households and businesses for higher borrowing-costs, and the current environment may keep EUR/USD under pressure as Fed Fund Futures highlight expectations for another 25bp rate-hike at the next quarterly meeting in December.

With that said, the rebound from the 2018-low (1.1301) may continue to unravel following the failed attempt to test the June-high (1.1852), with the downside targets still on the radar for EUR/USD as it initiates a fresh series of lower highs & lows. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

EUR/USD Daily Chart

Image of eurusd daily chart

Recent developments instill a bearish outlook for EUR/USD as the Relative Strength Index (RSI) snaps the upward trend carried over from August, with the exchange rate at risk of exhibiting a more bearish behavior as the oscillator approaches oversold territory. In turn, the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) sits on the radar, with the next downside area of interest comes in around 1.1290 (61.8% expansion), which sits just beneath the 2018-low (1.1301).

For more in-depth analysis, check out the Q4 Forecast for the Euro

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Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.