- EUR/USD tests key support at 1.10 ahead of ECB rate decision.
- Dollar rebounds as market adjusts Fed rate cut expectations.
- We will discuss key technical levels to watch ahead of ECB and PPI.
- For less than $9 a month, InvestingPro's Fair Value tool helps you find which stocks to hold and which to dump at the click of a button.
The EUR/USD pair has been in a correction phase this week, finding support at the 1.10 level after facing selling pressure yesterday. As traders await the ECB's interest rate decision today, the pair's reaction to this support level remains crucial.
Following the CPI data yesterday, the market has shifted its expectations for the Fed's next move. The focus has moved from a potential 50 basis point rate cut to a more likely 25 basis points.
This adjustment reflects ongoing concerns about persistent core inflation, which bolstered demand for the dollar. As a result, the DXY index, which fell to 101.2 earlier in the day, rebounded to 101.7 post-CPI.
The index encountered resistance at 101.80 during Asian trading hours today but has since stabilized at 101.70, as traders anticipate PPI data and the ECB's decision.
What to Expect From the ECB Today?
A 25 basis point cut to the deposit rate is widely expected, with additional reductions of 60 basis points anticipated for the marginal borrowing and other policy rates.
If the ECB implements these cuts while the Fed remains cautious, it could pressure the EUR/USD pair further. However, if recession concerns ease, the dollar might strengthen before the US elections despite the rate-cut cycle.
EUR/USD: Technical View
The EUR/USD pair remains anchored around the 1.10 support level, which is crucial for its near-term direction.
If buying interest at this price point emerges, it could face resistance between 1.1050 and 1.1075. Should the correction persist, the pair might slide to the next support level at 1.0925.
In a more bullish scenario, sustained buying above 1.1075 could signal the end of the current correction. This shift would likely strengthen the potential for EUR/USD to advance towards the 1.1250 to 1.132 range.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.