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EURUSD Outlook: ECB Rate Cut vs. U.S. Economic Indicators

By Learn and Trade Forex

Factors Supporting EURUSD:

•The ISM Manufacturing PMI has shown contractionary numbers, indicating a slowdown in manufacturing activities.

•Job Openings in the JOLTS report fell short of expectations, pointing to potential softness in the labor market.

•ADP’s Non-Farm Employment figures also came in below expectations, reinforcing concerns about employment.

•A 25 basis points rate cut by the ECB is likely to be anticipated by the market tomorrow, which could support the Euro.

Factors Weighing Against EURUSD:

•The ISM Services PMI is expected to show expansionary figures later today, potentially bolstering the U.S. dollar.

•Non-Farm Payrolls are forecasted to report a positive change of 11K on Friday, signaling potential strength in the U.S. economy.

•Global inflationary pressures are expected to ease with the significant drop in oil prices, which might influence central bank decisions on rate cuts.

Market participants are likely anticipating tomorrow’s 25 bp rate cut from the ECB, with a keen focus on the details of the monetary policy statement. Given the lack of surprising expectations, the ECB’s guidance will be pivotal.

Outlook on U.S. Economic Data:

This week, the U.S. economic outlook appears bearish with key indicators underperforming. The ISM Manufacturing PMI has fallen further into contractionary territory, raising alarms about the manufacturing sector. Attention now turns to the ISM Services PMI, which could potentially surprise to the upside after months of missing expectations. This prevailing bearish sentiment on the dollar is creating a bullish outlook for the Euro.

Technical Analysis:

•EURUSD Daily Chart – Logarithmic Scale:

Applying the Fibonacci extension tool from the October 2023 low, December 2023 high, and April 2024 low:

•1.0914: Serves as a resistance level for the EURUSD’s uptrend before it can continue higher.

•1.0944: Corresponds with the 50% Fibonacci extension level.

•1.1025: Matches the 61.8% Fibonacci extension level.

On the downside, 1.0830 and 1.0790 levels may offer short-term support, while 1.0730 could be the next significant support level for a longer-term perspective.

Stay updated with Learn and Trade Forex for more insights and analyses on the evolving EURUSD landscape. Happy trading!

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