EUR/USD remain depressed near 1.0750 support with central banks in focus

• The Dollar remains stronger as the US NFP cooled hopes of Fed cuts
• Monetary policy decisions by the Fed and the ECB to set the pair’s direction this week.
• EUR/USD might dip to 1.05 in the coming quarter – Rabobank.

The Euro has opened the week in the same bearish tone seen during the previous one. The pair seems unable to put a significant distance from Friday’s lows, with the US Dollar buoyed by the upbeat US employment report.

Central Banks in the spotlight

Friday’s Nonfarm Payrolls beat expectations, laying bare the resilience of the US labour market and wage inflation accelerated, pouring cold water on investors’ hopes of Fed cuts early next year. This gave a fresh impulse to the US Dollar.

This week the main focus will be on Tuesday’s US CPI data ahead of Wednesday’s Federal Reserve’s monetary policy decision. The bank is widely expected to leave rates on hold at 5.5%, thus the interest will be on the interest rate projections and in the tone of chairman Powell’s comments.

On Thursday, the focus will shift towards the ECB. The benchmark interest rate will remain at 4.5% and, again, investors will be looking for dovish hints on President Lagarde’s comments as the weak economic growth and cooloing inflation have boosted hopes of rate cuts in early 2024.

The Euro could reach 1.05 in the coming quarter – Rabobank

The Technical Analysis Team of Rabobank see the pair extending its downtrend in the coming months: “ If the ECB can contain inflation going forward, a weaker EUR could help support the reforms needed to boost the competitiveness of the EU (...) On a 1-to-3-month view, we see the potential for EUR/USD to dip back to the 1.05 region.” 

Technical levels to watch