On Wednesday, the EURUSD currency pair quotes shows moderate growth after falling by 0.54% on the previous trading day. Increasing geopolitical tensions in the Middle East may put pressure on risk assets, including the euro. Investors are awaiting economic data from the US for further signals.
Traders are still assessing the probability of a significant interest rate cut by the US Federal Reserve (Fed) in November. After Fed Chairman Jerome Powell’s statements about smooth and gradual easing of monetary policy, market participants’ expectations have changed. The probability of a 50 basis point rate cut in November is now assumed to be 37.4%. At the same time, the probability of a 25 basis point cut is estimated at 62.6%, according to the CME FedWatch.
On Tuesday, weak US economic data put pressure on the dollar. The ISM Purchasing Managers’ Index in the manufacturing sector for September remained at 47.2, below the expected 47.5. This indicates ongoing contraction in the US industry.
In the second half of the week, investors are anticipating the publication of the US employment data (ADP) and commentary from the officials of the US central bank. Considerable attention is also focused on the non-farm payrolls report in the United States.
Meanwhile in the eurozone, inflation decelerated in September, falling below the European Central Bank’s (ECB) target level. The Harmonized Index of Consumer Prices rose by 1.8% on an annualized basis, up from 2.2% in August. This is the lowest reading since April 2021. Although the economic situation in the eurozone remains complicated, the decline in inflation is providing some cautious optimism. The ECB had already lowered interest rates to 3.50% in September and hinted at further possible cuts in the nearest future.
From the technical point of view, the EURUSD quotes on the D1 chart are in a wide corrective upward channel. The price, having reached the upper boundary of the channel, is now showing signs of correction on the H4 timeframe. The RSI indicator divergence (standard values) is already playing off the price decline towards the trend support of the channel.
Signal:
The short-term outlook for EURUSD is to sell.
The target is at the level of 1.0850.
Part of the profit should be taken near the level of 1.1000.
A stop loss is placed near the level of 1.1240.
The bearish trend is of a short-term nature, so it is worth considering a trading volume of no more than 2% of your balance.
