Current trend

Since the end of last month, the EUR/USD pair has been declining, currently trading at 1.0883 (Murrey level [1/8]) because of the difference in expectations regarding the US Fed and the European Central Bank (ECB) monetary actions.

Thus, experts believe that in November, the American regulator will slow down the interest rate adjustment pace from –50 basis points to –25 basis points since, in September, the labor market is strengthening (employment increased by 254.0K, and unemployment fell to 4.1%), and inflation is falling more slowly than expected, amounting to 2.4% instead of 2.3%. The US Fed’s officials warned investors that they would remain cautious and may limit to one interest rate change instead of two this year.

On the other hand, ECB officials may speed up monetary easing as the regulator’s board members are concerned about the possibility of inflation consolidating below the 2.0% target, as confirmed yesterday by Banque de France Governor François Villeroy de Galhau and Bank of Finland President Olli Rehn. Later, ECB President Christine Lagarde urged caution. However, her comments did not affect market participants’ confidence that the regulator could increase the interest rate adjustment from –25 basis points to –50 basis points.

Today’s preliminary data on business activity in the EU for October was positive: the manufacturing PMI rose from 45.0 points to 45.9 points instead of the expected 45.1 points, while the service PMI fell from 51.4 points to 51.2 points, remaining in the green zone. The composite PMI increased from 49.6 points to 49.7 points, supporting the euro. However, the long-term fundamental background puts pressure on the asset.

Support and resistance

The trading instrument is close to 1.0742 (Murrey level [0/8]). Its breakout will ensure a decline to ​​1.0645 (Fibonacci correction 38.2%) and 1.0600 (year’s low). In case of a breakout of 1.0864 (Murrey level [2/8]), growth to the area of ​​1.0945 (Fibonacci correction 50.0%, the middle line of Bollinger Bands), 1.1047 (Murrey level [5/8]) may follow.

Technical indicators confirm the downward trend: Bollinger Bands are directed downwards, and the MACD histogram is decreasing in the negative zone. Stochastic may leave the oversold zone, not excluding limited correction.

Resistance levels: 1.0864, ​​1.0945, 1.1047.

Support levels: 1.0742, 1.0645, 1.0600.

Trading tips

Short positions may be opened below 1.0742, with the targets at 1.0645, 1.0600, and stop loss 1.0800. Implementation period: 5–7 days.

Long positions may be opened above 1.0864, with the targets at 1.0945, 1.1047, and stop loss 1.0820.