EUR/USD Losses Mount, EUR/GBP Rejects Resistance

EUR/USD Forecast – Prices, Charts, Analysis

• ECB may have reached a peak in interest rates
• EUR/GBP – The battle of two weak currencies

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The euro recently fell below 1.0500 against the US dollar, and European trade today is struggling to regain that level. The strength of the U.S. dollar, supported by rising U.S. bond yields, is the main driver of the rally, but a weaker euro under continued selling pressure is also a contributing factor. Last week’s euro zone inflation report showed price pressures easing faster than expected, prompting markets to price in further interest rate hikes. Eurozone headline inflation fell to 4.3% in September, lower than the expected 4.5%, as price increases across the eurozone slowed.

The combination of slower inflation and slower eurozone growth (0.1% in the first and second quarters) has changed market expectations for further ECB rate hikes. The latest market forecasts give a 76% chance that interest rates will be left unchanged at the October 26th meeting, and this will remain largely unchanged for the next three meetings. Indeed, if these market probabilities are correct, the ECB will start cutting interest rates in the second quarter of next year. This dovish shift made the euro vulnerable to further depreciation.

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DailyFX Calendar

The euro is currently trading at its lowest value against the US dollar since early December last year. The pair is being guided lower by the 20-day simple moving average (red line), but last weekend’s 50-day and 200-day crossover further strengthens the bearish outlook. The next support level appears to be around his 1.0404 50% Fibonacci retracement level.

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EUR/USD Daily Price Chart – October 3, 2023

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EUR/GBP has been trading in a range since early May and is likely to remain in this range for the next few days. Both currencies are weak and neutralizing each other, and while the pair’s recent rally could continue, a solid breakout will require strong impetus. The pair remains constrained by the 200-day simple moving average while the 20-day and 5-day sumas provide support.

EUR/GBP Daily Price Chart – October 3, 2023

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