Key Takeaways
- The EUR/USD pair is experiencing a significant downtrend, moving from highs near 1.1920 to below 1.1600.
- Upcoming US inflation data (CPI) and PMI figures are key market drivers, with expectations pointing towards rising inflation and a strong US economy.
- European PMI data suggests a potential slowdown, which could influence the European Central Bank’s interest rate decisions.
- Technical indicators suggest further downside potential for EUR/USD, with a target of 1.1500, unless resistance at 1.1725 is breached.
EUR/USD Faces Downward Pressure Amid Key Economic Data
The EUR/USD currency pair has entered a strong bearish phase, marked by a continuous decline from a September 17 high of 1.1920 down to the 1.1600 level. This downward movement is largely attributed to traders keenly awaiting critical US economic indicators, particularly the forthcoming inflation report.
EUR/USD Forex Signal 23/10: Euro Pressure Ahead (Chart)
Anticipation Builds for US Inflation Report
Market participants are closely monitoring the impending US consumer inflation data, scheduled for release on Friday. Economists surveyed by Reuters project that the headline Consumer Price Index (CPI) will increase to 3.1% in September, up from 2.9% in August. This rise follows a pattern observed over the past few months, potentially influenced by recent tariff implementations.
💡 Core inflation, which excludes volatile food and energy prices, is also expected to climb to 3.2% from the previous month’s 3.1%. These figures suggest that inflation is moving further away from the Federal Reserve’s 2.0% target, a development that could impact monetary policy decisions.
Economic Data from US and Europe
The EUR/USD exchange rate’s reaction will also be shaped by upcoming Purchasing Managers’ Index (PMI) data from both the United States and Europe. These reports will offer insights into the current health of their respective economies.
📊 In the US, economists anticipate that manufacturing and services PMI will rise to 52 and 54.2, respectively. Such outcomes would indicate a robust performance of the US economy.
📉 Conversely, European analysts project a slight dip in services PMI from 51.3 in September to 51.1 in October, with the manufacturing figure potentially easing from 49.8 to 49.7. These forecasts suggest a continued slowdown in the Eurozone, which could lead the European Central Bank to maintain interest rates unchanged at its upcoming meeting on Thursday.
US Dollar Strength and Technical Outlook
The US dollar index has also been on an upward trajectory, climbing from its year-to-date low of $96 to $100, adding to the pressure on the EUR/USD pair.
Technical Analysis of EUR/USD
On the daily timeframe chart, the EUR/USD has pulled back significantly from its year-to-date peak of 1.1920 reached in September. The recent upward momentum encountered considerable resistance around the 1.1730 mark, which represented the high for October.
⚡ The pair has fallen below the 50-day Exponential Moving Average (EMA), and the Relative Strength Index (RSI) has dropped below the neutral 50 level. Furthermore, the Trend Strength Index (TSI) has shown a consistent decline.
📌 Based on these technical indicators, the EUR/USD is likely to continue its descent, with sellers aiming for the next significant support level at 1.1500. A decisive move above the 1.1725 resistance level would be necessary to invalidate this bearish outlook.
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Final Thoughts
The EUR/USD pair is currently under considerable bearish pressure, driven by an anticipated strengthening of the US dollar and key economic data releases. Technical indicators suggest further downside potential, with traders watching the 1.1500 support level.
📊 Traders should remain vigilant for the upcoming US inflation and PMI data, as well as European economic indicators, which are expected to be significant drivers of currency pair movement in the short term.