EUR/USD logs four-day losing streak ahead of ECB

Dovish ECB expectations keep EUR on the back foot.
The markets may have priced in a September rate cut.
The EUR could take a beating if the ECB boosts prospects of aggressive rate cuts.

Omkar Godbole FXStreet Contributor

EUR/USD fell for the fourth straight day on Wednesday on the prospect of the European Central Bank (ECB) rate cuts.

The ECB is widely expected to leave policy rates unchanged today, but prepare the ground for cuts in the coming months by removing the tightening bias from its interest rate forward guidance.

UBS expects a 10 basis points (bps) rate cut on 12 September, with a further 10bps to follow on 12 December (or possibly earlier, on 24 October).

Meanwhile, ING believes the recent economic data out of the Eurozone has pushed the ECB closer to the July action (pre-emptive rate cut ahead of the Fed).

Markets may have priced in September rate cut

The market seems to have priced in a 10 basis point rate cut in September. This is evident from EUR/USD pullback from the June 25 high of 1.1412 to Wednesday's low of 1.1127.

The German 10-year Bund yield has also shed 18 bps over the nine days.

Hence, the EUR may be able to defend 1.11 if the ECB hints at September rate cut, but downplays the need for aggressive easing.

The common currency, however, could take a beating and drop to 1.10 in the next few days if the ECB sends out a strong dovish signal, setting the stage for multiple rate cuts over the next few months or cuts rates today.

As of writing, EUR/USD is trading at 1.1134. The bear flag breakdown on the daily chart indicates the path of least resistance is to the downside and the pair could drop well below 1.11. A bullish reversal would be confirmed if and when the pair rises above 1.1286, invalidating the bearish lower highs setup.

Technical levels

EUR/USD

Overview
Today last price	1.1134
Today Daily Change	-0.0006
Today Daily Change %	-0.05
Today daily open	1.114

Trends
Daily SMA20	1.125
Daily SMA50	1.1243
Daily SMA100	1.1245
Daily SMA200	1.1313

Levels
Previous Daily High	1.1156
Previous Daily Low	1.1127
Previous Weekly High	1.1286
Previous Weekly Low	1.12
Previous Monthly High	1.1414
Previous Monthly Low	1.116
Daily Fibonacci 38.2%	1.1138
Daily Fibonacci 61.8%	1.1145
Daily Pivot Point S1	1.1126
Daily Pivot Point S2	1.1112
Daily Pivot Point S3	1.1097
Daily Pivot Point R1	1.1156
Daily Pivot Point R2	1.1171
Daily Pivot Point R3	1.1185

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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