What's Next for EUR/USD?

• Fundamental Outlook for the Eurozone
• Fundamental Outlook for the U.S. Dollar
• What is the direction of the EUR/USD pair?
• What’s the Next Move for the EUR/USD?

Fundamental Outlook for the Eurozone

Today, on 01/10/2024, the CPI Flash Estimate y/y for the Eurozone was released, showing a result in line with expectations at 1.8%, which is 0.4% lower than the previous reading. The Core CPI Flash Estimate y/y also matched expectations at 2.7%, slightly lower than the previous reading by 0.1%. These data indicate a decline in inflation within the Eurozone.

In addition to the economic data, European Central Bank (ECB) President Christine Lagarde mentioned that the ECB has become more optimistic about its ability to control inflation, which currently stands at 2.2% based on the latest CPI reading for the Eurozone. However, she also warned of a potential temporary acceleration in inflation data in the fourth quarter of 2024, as the sharp declines in energy prices may subside. This prompts investors to pay closer attention to energy price movements, whether they rise or fall. On the monetary policy front, Christine Lagarde stated that interest rates would remain sufficiently restrictive as long as necessary to achieve their goals.

Fundamental Outlook for the U.S. Dollar

Several important economic data are expected for the U.S. dollar this week, with a particular focus on U.S. employment data at the end of the week on Friday, October 4th. Expectations point to the U.S. economy adding 144,000 jobs, only 2,000 more than the previous month, and maintaining the unemployment rate at 4.2%. These data are crucial as their impact on the U.S. dollar will be significant in the medium to long term due to their strong influence on the monetary policy decisions during the next Federal Reserve meeting in November.

In addition to the employment data, Federal Reserve Chair Jerome Powell mentioned yesterday that the Fed would lower interest rates over time. This announcement was seen as positive for the U.S. dollar and highlighted Powell's cautious tone in his recent dovish stance, as per analyst analysis.

Technical view of the EUR/USD

Figure 1: EURUSD H4 Chart, Tradingview

The EUR/USD pair is trading in a downtrend on the four-hour chart, forming lower lows consecutively. A new low of 1.11140 was recorded during today's trading session, confirming the bearish momentum of this pair.

Away from the significant economic data set to be released this week and from a technical perspective, a rise to the 1.11822 level presents an opportunity for the pair to resume its downward trend, targeting the 1.11135 level, according to the analyst’s view. To maintain a bearish outlook, the price should not break above the 1.12089 level, and no new high should be recorded above it, as per analyst analysis.