EUR/USD Eyes Key Supports Amid ECB Rate Decision Uncertainty

Market Overview

On Thursday, EUR/USD continues to face selling pressure after losing key weekly support on Wednesday, driven by stronger-than-expected core inflation data from the U.S. in August. This data has prompted markets to align expectations with a minimal rate cut at the upcoming Federal Reserve meeting. As a result, euro buyers were pushed back despite a short-lived bullish correction during early Thursday trading.

With the European Central Bank (ECB) meeting looming, where a 25-basis-point rate cut is widely expected, additional selling pressure on the EUR/USD pair could emerge. This is especially true unless the more hawkish members of the ECB show signs of slowing the rate cut cycle. In the short term, euro bulls remain cautious, awaiting more clarity from the ECB’s decision.

Technical Analysis

On the daily chart, EUR/USD broke through the previous week’s low at 1.10260 during Wednesday’s session, signaling further downside risks. The pair’s failure to reach the August 23rd high and its drop below the 34-day moving average has intensified bearish momentum, reflected by the declining MACD histogram. Moreover, Wednesday’s candlestick features a long upper shadow, signaling renewed selling pressure.

If sellers maintain control and drive the price below the 34-day moving average, the next downside target is at 1.09909. A break below this level would increase bearish momentum, leading to a test of the 1.09380-1.08968 support zone, which aligns with the 100-day moving average. This area is also where the long-term ascending trendline is expected to act as critical support, potentially halting further declines.

Oscillator Confirmations

RSI: Currently neutral, indicating neither overbought nor oversold conditions but leaning towards bearish sentiment.

MACD: Neutral, but showing signs of bearish momentum as the MACD line edges closer to crossing below the signal line.

Moving Averages: The price is now trading below the 34-day moving average, signaling a short-term bearish outlook, while the 100-day moving average offers key long-term support.

Alternative Scenario

In contrast, if buyers regain control, they will need to push the price above 1.10754, a level that sits just above the 34-day moving average. Breaking through this resistance would pave the way for a retest of the 1.11552 level. Only a sustained move above this key resistance would invalidate the bearish scenario and signal a potential return to the previous uptrend.

Key Levels Overview

• Resistance Levels:
  • Resistance 3: 1.11552
  • Resistance 2: 1.10754
  • Resistance 1: 1.10260
  • Current Price: 1.10181
• Support Levels:
  • Support 1: 1.09909
  • Support 2: 1.09380
  • Support 3: 1.08968

Key Events to Watch

Later today, all eyes are on the ECB’s rate decision, where a cut is highly anticipated. However, the focus will be on whether the ECB hints at further cuts in October or December. Most market participants expect ECB President Christine Lagarde to maintain a data-dependent approach, reinforcing that future decisions will be made on a meeting-by-meeting basis. This could keep the market cautious in the near term.

In the U.S., jobless claims and producer price index (PPI) data will be released later in the day. Given the Federal Reserve’s focus on labor market conditions, jobless claims data will carry additional weight. A higher-than-expected figure, particularly above the forecast of 230,000, could revive expectations of a more aggressive 50-basis-point cut by the Fed. Meanwhile, PPI is expected to show a modest increase of 0.1% for the month.

Conclusion

EUR/USD is struggling to maintain its footing amid economic uncertainty, having lost key weekly support. The focus now shifts to the ECB’s rate decision, which could further weigh on the euro if dovish signals prevail. Technically, the pair remains vulnerable, with critical supports at 1.09909 and 1.09380 in sight. Conversely, buyers will need to break through 1.10754 to regain bullish momentum. Key U.S. economic data, including jobless claims and PPI, will also play a significant role in determining the pair’s next move.

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