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EUR/USD Rate Forecast: November Low on Radar Following ECB Meeting

EUR/USD Rate Forecast: November Low on Radar Following ECB Meeting

David Song, Strategist

EUR/USD Rate Talking Points

EUR/USD remains under pressure following the European Central Bank (ECB) interest rate decision, with the November low (1.0981) on the radar as the exchange rate extends the series of lower highs and lows from the previous week.

EUR/USD Rate Forecast: November Low on Radar Following ECB Meeting

EUR/USD extends the decline from earlier this month as the ECB sticks to the same script and endorses a dovish forward guidance at its first meeting for 2020.

The Euro came under pressure as President Christine Lagarde emphasized that the “Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, and the ECB may expand its balance sheet throughout 2020 as the risks surrounding the Euro area “remain tilted to the downside.”

Image of ECB interest rates

It seems as though the ECB is in no rush to alter the monetary policy outlook even though the US and France reach a trade truce, and the Governing Council may continue to rely on non-standard measures to support the economy as the central bank struggles to achieve its one and only mandate for price stability.

In turn, the Euro may face headwinds ahead of the next meeting on March 12 and EUR/USD may continue to give back the rebound from the 2019 low (1.0885) as the correction stalls ahead of the August high (1.1250).

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EUR/USD Rate Daily Chart

Image of EUR/USD rate daily chart

Source: Trading View

  • The broader outlook for EUR/USD remains tilted to the downside as the exchange rate cleared the May-low (1.1107) following the Federal Reserve rate cut in July, with Euro Dollar trading to a fresh yearly-low (1.0879) during the first week of October.
  • The monthly opening range has been a key dynamic for EUR/USD in the fourth quarter of 2019 as the exchange rate carved a major low on October 1, with monthly high for November occurring during the first full week of the month, while the low for December happened on the first day of the month.
  • With that in mind, the correction from the 2019 low (1.0879) may continue to unravel amid the failed attempt to test the August high (1.1250), and the bearish price action from the start of the month looks poised to persist as EUR/USD extends the decline from the December high (1.1239), with the exchange rate snapping the upward trend from late last year.
  • The Relative Strength Index (RSI) highlights similar dynamic as the oscillator failed to preserve the bullish formation from November after failing to push into overbought territory.
  • As a result, the recent series of lower highs and lows brings the November low (1.0981) on the radar, but need a break/close below the Fibonacci overlap around 1.0950 (100% expansion) to 1.0980 (78.6% retracement) to open up the 2019 low (1.0879).

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.