EURUSD is now hovering around 1.11200, continuing its downward movement after a few failed recovery attempts. Over the past week, the euro has noticeably weakened, while the US dollar index (DXY) has strengthened to 102.4. The pair is likely to keep declining over the next month.
Today’s rate decision by the Federal Reserve (Fed) is the star event of the week. Following the September hike to the 3.75%–4.00% range, most market participants expect a pause. However, last month, annual inflation reached 3.7%, limiting the room for monetary easing. If the Fed maintains its hawkish rhetoric and leaves the door open to an additional rate increase in December, the dollar could gain fresh momentum.
The European Central Bank (ECB) meeting will take place tomorrow, October 29. In September, inflation in the region accelerated from 3.2% to 3.8%. As a result, borrowing costs rose to 2.50% after the previous hike. Elevated energy prices are only adding fuel to the fire, intensifying inflationary pressure and increasing costs for European businesses. Under such conditions, further tightening could take a toll on economic growth. On the other hand, an unexpectedly hawkish ECB stance could temporarily underpin the euro.
Unfortunately, stubborn inflation and a stronger dollar are not the only headwinds for the single currency. High yield on US government bonds present another serious obstacle. Returns on 10-year Treasuries are now around 5%, keeping dollar-denominated assets attractive to international investors.
From a technical perspective, EURUSD is approaching the local 1.11000 support level. A break below this threshold would set the stage for a continuation of the downward movement, with the nearest potential target at 1.07000.
The overall recommendation is to sell EURUSD at the current price of 1.11200, aiming for 1.07000 within one month. To lower the risk of adverse market movements, place a Stop Loss order at 1.14000.
This content is for informational purposes only and is not intended to be investing advice.
