Current trend

The EUR/USD pair is trading near a weekly low of 1.0850 ahead of the European Central Bank’s (ECB) monetary policy decision today at 14:15 (GMT 2).

According to preliminary estimates, officials will adjust borrowing costs by –25 basis points amid the slowdown in inflation in the EU from 2.2% to 1.8% in September, reaching the regulator’s target range with an upper limit of 2.0%. The second factor to be the basis of the financial authorities’ decision is the Q2 gross domestic product (GDP) amounted to 0.6% YoY, not enough to form a clear positive trend. If the forecasts come true, a short-term decline in the EUR/USD pair may reverse upwards since the interest rate change is priced in already.

The American dollar is strengthening in USDX, added 3.1% since September 30 because of a change in investor sentiment regarding the US Fed interest rate. A month ago, experts discussed the interest rate cut of 50 basis points. However, now, the value may be adjusted by –25 basis points or remain at 5.00% against accelerating inflation. Thus, after reaching lows in July and August, the core consumer price index began to grow again, amounting to 3.3% YoY in September, above the regulator’s target range. In addition, the currency is supported by the proximity of the presidential elections and the escalation of geopolitical tensions in the Middle East.

Support and resistance

The long-term trend remains upward. After a breakdown of 1.0910 at the beginning of the week, the next target is the trend support level of 1.0785, where the price may reverse upwards. The RSI indicator (14) has reached the oversold zone, which indicates the likelihood of growth soon.

The medium-term trend reversed downward a week after a breakdown of the 1.1046–1.1029 zone. The quotes have reached zone 2 (1.0854–1.0834). After a breakdown, the target will be zone 3 (1.0662–1.0642). Otherwise, an upward correction to the resistance area of ​​the new trend at 1.1060–1.1041 may follow.

Resistance levels: 1.0910, 1.1010, 1.1130.

Support levels: 1.0785, 1.0670.

Trading tips

Long positions may be opened from the 1.0785 level, with the target at 1.0910 and stop loss of 1.0755. Implementation period: 9–12 days.

Short positions may be opened below 1.0755, with the target at 1.0670 and stop loss 1.0790.