EUR/USD dips to three-month low amid strong Dollar demand

The major currency pair fell to 1.0789 by Thursday.

This is almost a three-month low. Demand for the US currency is fuelled by expectations of an orderly and negative interest rate cut by the US Federal Reserve, as well as strong forecasts for a second Donald Trump presidency.

The Euro currency is also weakening under the influence of a decisive rate cut at the European Central Bank. There is a clearly defined trend here, which leaves the EUR exchange rate with no options.

This week, Fed monetary policymakers mentioned that it is desirable to avoid excessive steps regarding the easing of monetary conditions in the US. The cost of credit in the States could fall by 50 basis points before the end of the year - but hardly more.

Fed caution and the high probability of Trump winning the November election are contributing to US dollar strength. US government bond yields are rising steadily.

Today the market will pay attention to the statistics on business activity in services and industry from Markit in October. In the focus of attention will be data on new home sales and the weekly report on claims for unemployment benefits. Employment figures are worth paying particular attention to as the Fed is also looking at them.

Technical analysis of EUR/USD

The EUR/USD pair has completed a downward wave to 1.0760 and is now rebounding towards 1.0880. After reaching this level, a pullback to 1.0820 is anticipated. The market may form a consolidation range at these lows, with a potential breakout upwards towards 1.0900 and possibly extending to 1.0990. The MACD indicator, currently below zero but pointing upwards, supports the possibility of a corrective rally.

On the hourly chart, EUR/USD is developing a second growth impulse towards 1.0824. Once this level is achieved, a corrective phase will be initiated, targeting 1.0790. The Stochastic oscillator, with its signal line moving towards 80 from above 50, supports this short-term bullish correction within the broader bearish context.