EUR/USD Forecast - Prices, Charts, and Analysis
- ECB may have reached peak rates
- EUR/GBP - A battle of two weak currencies
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The Euro broke below 1.0500 against the US dollar recently and is struggling to reclaim this level in European trade today. A strong US dollar, bolstered by rising US Treasury yields, is the main driver of the move, while Euro weakness is also a contributing factor as the pair succumb to ongoing selling pressure. Last week’s Euro Area inflation report showed price pressures easing at a faster-than-expected pace and this has led the market to price-out further interest rate hikes. Euro Area headline inflation fell to 4.3% in September, missing estimates of 4.5%, as price increases across the single block slowed.
A combination of slowing inflation and tepid Euro Area growth – 0.1% in Q1 and Q2 – has shifted market expectations for further ECB rate increases. Latest market forecasts show a 76% probability that rates will remain untouched at the October 26 meeting, and this hardly changes for the subsequent three meetings. Indeed if these market probabilities are correct, the ECB will start cutting rates in Q2 next year. This dovish shift has left the Euro vulnerable to further losses.
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The Euro is currently trading at its lowest level against the US dollar since early December last year. The pair have been guided lower by the 20-day simple moving average (red line), while a bearish 50-day/200-day crossover at the end of last week has added to the negative outlook. The next level of support is seen off the 50% Fibonacci retracement level at 1.0404.
EUR/USD Daily Price Chart – October 3, 2023
EUR/GBP has been rangebound since early May and this range is likely to remain untroubled in the coming days. Both currencies are weak and neutralizing each other, and while the recent push higher in the pair may continue, a confirmed breakout will need a strong driver. The pair remains capped by the 200-day simple moving average while the 20- and 5-day smas are providing support.
EUR/GBP Daily Price Chart – October 3, 2023
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What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
