EURUSD is currently hovering around 1.12200, trying to regain its footing after a lengthy decline. However, the pair remains under pressure for the time being. The baseline scenario for the coming month points to a potential downward move, despite a short-term weakening of the dollar.
Elevated inflation and anemic economic growth are the eurozone’s Achilles heel. In September, the Consumer Price Index (CPI) accelerated to 3.8% year-on-year, up from 3.2% in August. Last month, the European Central Bank (ECB) increased its deposit rate to 2.50%. The next meeting is scheduled for October 29. Further policy tightening could support the euro, but it would simultaneously raise financing costs for businesses. And that’s not all—expensive energy and brewing uncertainty over France’s fiscal health add to the mix.
Across the Atlantic, all eyes are glued to the Federal Reserve (Fed) meeting on October 27–28. According to an October poll, most economists expect interest rates to remain in the 3.75%–4.00% range but forecast a hike in December. If the regulator confirms its readiness to continue taming persistent inflation, the greenback may strengthen again, resuming the EURUSD’s decline.
At the same time, the yield on 10-year US Treasury bonds has just slid to approximately 4.97%, and the dollar index (DXY) has eased to 101.64 points. This temporarily limits pressure on the euro and increases the likelihood of a local recovery ahead of the central bank meetings. However, the gap between the economic prospects of the United States and the eurozone could shift the balance in favor of the American currency once again.
The final recommendation:
— Sell EURUSD at the current price of 1.12200, targeting 1.10000 within a couple of weeks.
— Place a Stop Loss order at 1.14000 to manage risks if the market moves in the opposite direction.
This content is for informational purposes only and is not intended to be investing advice.
