• Market participants expect the ECB to cut interest rates.

• The dollar rose due to increasing bets for a Trump win.

• Traders await the US retail sales report for more clues on future Fed moves.

The EUR/USD forecast points South as the euro comes under pressure ahead of an expected European Central Bank rate cut. Meanwhile, the greenback was on the front foot due to the increasing likelihood of a Trump win. 

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The ECB will meet on Thursday, and market participants expect the central bank to cut interest rates. The Eurozone economy has slowed, and inflation has fallen below the 2% target. Moreover, policymakers are currently more focused on preserving growth.  

Christine Lagarde recently hinted at the likelihood of a rate cut at the next policy meeting. Lower borrowing costs weigh on the euro, especially when Fed policymakers are getting more cautious. Notably, the dollar has recovered due to a resilient economy and higher-than-expected inflation figures. The upbeat economic figures have resulted in cautious remarks, with some policymakers expecting only one rate cut before the year ends. 

Meanwhile, market participants are also pricing a likely Trump win, supporting the dollar. If Trump wins, his fiscal policy measures might result in high inflation, challenging the Fed’s mandate.

Meanwhile, traders await the US retail sales report for more clues on future Fed moves. Economists expect a 0.3% jump in sales. A higher-than-expected jump would lower the chances of a November Fed rate cut. Furthermore, it would continue the trend of robust economic demand. On the other hand, soft sales would signal weaker consumer spending, raising rate cut expectations.

EUR/USD key events today

• Eurozone’s main refinancing rate
• Eurozone monetary policy statement
• US core retail sales m/m
• US retail sales m/m
• US unemployment claims

EUR/USD technical forecast: Downtrend persists, but momentum fades

On the technical side, the EUR/USD price has made new lows after breaking below the 1.0900 support level. Furthermore, the price has fallen far below the 30-SMA, showing bears in the lead. However, the RSI is climbing as the price drops to new lows, indicating a bullish divergence.

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Consequently, Bearish momentum is fading and could allow bulls to resurface. A rebound would challenge the 30-SMA and the 1.0900 level. A break above would signal a reversal, allowing bulls to target the 1.1000 resistance level.

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