Current trend

This week, the EUR/USD pair has been actively correcting downwards and is now trading around 1.1040: the American currency is receiving support amid the latest statements by US Fed officials and labor market statistics, which reduce the likelihood of a sharp easing of monetary policy. Thus, on Monday, the head of the regulator, Jerome Powell, announced the possibility of further adjustment of the interest rate at a moderate pace, –25 basis points in November and December. Earlier, analysts assumed that the borrowing cost cut would amount to 50 basis points at one of the two meetings before the end of the year. Yesterday, the President of the Federal Reserve Bank of Richmond, Thomas Barkin, confirmed that the fight to return inflation to the target level of 2.0% is not yet over, limiting the possibilities for further steps. Meanwhile, the labor market is recovering, against which the department’s officials may exercise caution. The August open vacancies increased to 8.040M instead of the expected decrease to 7.640M, and the September employment from the Automatic Data Processing (ADP) company – by 143.0K, exceeding the forecasts (124.0K) and the July figure (103.0K). On Friday, investors are expecting the publication of federal data. If employment continues to grow, and unemployment decreases or remains the same, one of the key conditions for a significant rate cut (the labor market cooling) will not be met.

On the contrary, analysts expect the European Central Bank (ECB) officials to accelerate the pace of monetary policy adjustment since inflation and business activity are slowing. Thus, the September consumer price index fell to 1.8%, below the regulator’s target level, and the producer price index – from –2.2% to –2.3%. The September composite EU PMI decreased from 51.0 points to 49.6 points, remaining in the stagnation zone.

In general, the difference in approaches to monetary policy on the part of the US Fed and the ECB may ensure a further decline in the EUR/USD pair in the short term.

Support and resistance

The trading instrument is approaching 1.0986 (Murrey level [4/8], the lower line of Bollinger bands). After its breakdown, the current upward trend may change and a decline to the region of 1.0864 (Murrey level [2/8]) and 1.0742 (Murrey level [0/8]) may follow. If the quotes reconsolidate above 1.1108 (Murrey level [6/8], middle line of Bollinger bands), growth to around ​​1.1230 (Murrey level [8/8]) and 1.1352 (Murrey level [ 2/8]) may resume.

Technical indicators do not give a single signal: Bollinger bands are horizontal, the MACD histogram is preparing to move into the negative zone, and Stochastic has approached the oversold zone and may reverse upwards.

Resistance levels: 1.1108, 1.1230, 1.1352.

Support levels: 1.0986, 1.0864, ​​1.0742.

Trading tips

Short positions may be opened below 1.0986, with the targets at 1.0864, ​​1.0742, and stop loss 1.1065. Implementation period: 5–7 days.

Long positions may be opened above 1.1108, with the targets at 1.1230, 1.1352, and stop loss 1.1025.