Tuesday sees the EUR/USD pair decline for the second day in a row, falling to the 1.0890 region in the final hour and returning to its lowest level since August 8 the day before.
However, before making new wagers ahead of the major central bank event risk, bearish traders should wait for a breach below the 200-day Simple Moving Average (SMA).
Amid growing concerns over slow growth, the European Central Bank (ECB) is expected to decrease interest rates for the third time this easing cycle when it makes its policy announcement on Thursday.
Additionally, for the first time since 2021, Eurozone inflation dropped below the ECB’s 2% target, supporting the argument for additional policy easing. Consequently, this weakens the common currency, which plays a major role in influencing the EUR/USD pair, along with a strong US dollar.
Amid growing expectations for a less aggressive policy easing by the Federal Reserve (Fed), the USD Index (DXY), which measures the greenback against a basket of currencies, is holding steady close to a two-month high.
The markets have completely priced out the possibility of another significant Fed rate decrease in November, keeping the yields on US Treasury bonds elevated. Furthermore, the safe-haven dollar benefits from geopolitical worries, which further reinforce the likelihood of a further decline in the EUR/USD pair.
Traders are now anticipating the release of the German ZEW Economic Sentiment Index and Eurozone Industrial Production data on Tuesday.
The Empire State Manufacturing Index and statements by key FOMC members later in the North American session will fuel demand for the USD, which should provide the EUR/USD pair a brief boost.
Sources & Methodology
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