The EUR/USD pair is trading around 1.0968, and although the economic data from the Eurozone has been relatively stable, the euro is on the decline. What does this mean? Basically, the market is nervous about potential actions from the European Central Bank (ECB). Several ECB members, including heavyweights like Mário Centeno and François Villeroy de Galhau, have openly discussed cutting interest rates.
The logic here is simple: the labor market in the Eurozone is slowing down. Fewer jobs and less investment mean the ECB might feel pressured to stimulate the economy. And even though inflation is reasonably under control, the main focus is on ensuring economic growth doesn't lose momentum.
Meanwhile, on the US side, the dollar remains strong, with the US Dollar Index (USDX) flirting with the 102.20 mark. Recent US employment data exceeded expectations, with 254,000 new nonfarm jobs created in September. This news not only gave the dollar a solid boost but also reduced the chances of an aggressive rate cut by the Fed in November.
The Levels Game
Now, let's move on to the charts and technical levels. On the daily chart, EUR/USD is moving within an ascending channel but showing signs that it might break lower. The moving average of the "Alligator" indicator is showing a bearish bias, suggesting that downward pressure may continue. The "AO" histogram is painting negative bars, reinforcing the idea that the bearish move has strength.
Resistance: 1.1010, 1.1120
Support: 1.0950, 1.0830
What to Do?
Short Positions (sell): The selling opportunity seems clearer. If the price breaks below 1.0950 and stays below this level, it could pave the way for a drop to 1.0830. Here, the ideal stop loss would be around the 1.1020 region to manage the risks.
Long Positions (buy): If the price manages to hold above 1.1010, then there could be a buying opportunity, targeting 1.1120 as a goal. In this case, the stop loss should be set at 1.0950 to protect capital in case the upward move loses strength.
Strategic Summary
We are in an environment where the ECB is clearly considering interest rate cuts, while the dollar remains strong, supported by a healthy labor market in the US. If the ECB proceeds with an aggressive cut of -25 basis points or more, the EUR/USD could lose even more ground. On the other hand, if the narrative shifts and the ECB becomes more cautious, the euro might gain some momentum.
The keyword here is vigilance. If the Eurozone economy continues to slow down, the ECB will need to step in, which will likely weaken the euro further, especially with the US dollar in a strong position.
So, keep an eye on these technical levels and the ECB's decisions in the coming days, as they could be the turning point.