EUR/USD extended its downward trajectory on Thursday, losing an additional 0.3% following the European Central Bank’s (ECB) quarter-point rate cut. Coupled with stronger-than-expected US economic data, the pair is now hovering near its multi-week lows around 1.0800. With bearish sentiment firmly in control, traders are bracing for further declines in the coming sessions.
Key Takeaways
- ECB Rate Cut: The ECB delivered a 25 bps rate cut, lowering the Main Refinancing Operations Rate to 3.4%, which added pressure to the Euro.
- Weak Eurozone Data: Final Eurozone HICP inflation for September fell to 1.7% YoY, missing expectations of 1.8%, further eroding Euro support.
- Strong US Data: Robust US Retail Sales and Initial Jobless Claims data bolstered the USD, driving EUR/USD lower.
- Bearish Momentum: EUR/USD remains in a clear downtrend, with the pair breaking critical support levels on both daily and intraday charts.
Technical Analysis
Daily Chart Overview
- Fibonacci Levels & Moving Averages: The EUR/USD daily chart reveals a bearish trend, with the pair falling below key Fibonacci retracement levels and moving averages. After failing to hold above the 0.618 Fibonacci level at 1.0960, EUR/USD has extended its decline toward the 0.5 retracement level at 1.0863.
- Critical Support Zones: The pair is currently testing the 1.0800 psychological level, with further support seen at 1.0750, aligned with the 0.382 Fibonacci retracement.
- MACD and EMA Signals: The 50-day EMA at 1.0996 and the 200-day EMA at 1.0904 have been breached, confirming a strong bearish outlook. The MACD indicator remains entrenched in negative territory, showing no signs of a reversal, further supporting the bearish trend.
H4 Chart Overview
- Supply and Demand Zones: The 4-hour chart highlights significant supply zones near 1.1000-1.1100, where sellers re-entered the market, driving the pair lower. Immediate demand sits around 1.0800, where buyers are attempting to prevent further declines.
- Break of Structure (BOS): Recent price action has shown a Break of Structure (BOS) to the downside, confirming bearish control. The pair has consistently made lower highs (LH) and lower lows (LL) since breaking below 1.1100, indicating further downside potential.
H1 Chart Overview
- Intraday Pressure: On the 1-hour chart, the pair continues to face selling pressure, with 1.0850 acting as a minor support level. A sustained break below this level could accelerate the decline toward 1.0800.
- Volume Profile: The volume profile shows higher activity in recent bearish moves, suggesting strong conviction from sellers. Key supply zones remain around 1.0900, where the pair faces stiff resistance.
Economic Data
- ECB Rate Decision: The ECB’s 25 bps rate cut was widely expected but reinforced a bearish bias for the Euro. The final HICP inflation data coming in lower than anticipated has also left markets skeptical about the ECB’s future policy moves.
- US Economic Data: The US Retail Sales for September increased by 0.4%, exceeding the forecasted 0.3%, while Jobless Claims dropped to 241K, significantly below the previous week’s 260K. This strength in US data has provided further tailwinds for the USD, accelerating EUR/USD’s decline.
Trading Recommendations
- Bullish Scenario: Any recovery above 1.0900 could shift momentum back to the bulls, but this remains a challenging task unless economic data or sentiment improves for the Eurozone.
- Bearish Scenario: A break below the 1.0800 support level could open the door for further declines towards 1.0750, with extended targets at 1.0700. Traders should monitor intraday movements around 1.0800 for potential short opportunities.
Conclusion
The EUR/USD pair remains under intense bearish pressure, driven by a dovish ECB and stronger US economic data. The technical picture remains bleak, with key support levels under threat and bearish indicators pointing to further downside. Traders should closely watch the 1.0800 level for signs of either a breakdown or a potential bounce as the market digests both Eurozone and US developments.
