EUR/USD remains depressed below 1.0900, lowest since August 8 amid stronger USD

EUR/USD attracts sellers for the second successive day amid a bullish USD.
Bets for smaller Fed rate cuts and geopolitical risks underpin the Greenback.
Bears might refrain from placing fresh bets ahead of the ECB on Thursday.

Haresh Menghani FXStreet

The EUR/USD pair drifts lower for the second straight day on Tuesday and drops to the 1.0890 area in the last hour, back closer to its lowest level since August 8 touched the previous day. Bearish traders, however, need to wait for a break below the 200-day Simple Moving Average (SMA) before placing fresh bets ahead of the key central bank event risk.

The European Central Bank (ECB) is scheduled to announce its policy decision on Thursday and is expected to cut interest rates again for the third time this easing cycle amid mounting concerns over sluggish growth. Furthermore, inflation in the Eurozone fell below the ECB's 2% target for the first time since 2021 and backs the case for further policy easing. This, in turn, undermines the shared currency, which, along with a bullish US Dollar (USD), turns out to be a key factor weighing on the EUR/USD pair.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, stands tall near a two-month top amid firming expectations for a less aggressive policy easing by the Federal Reserve (Fed). In fact, the markets have now fully priced out the possibility of another oversized Fed rate cut in November, which keeps the US Treasury bond yields elevated. Moreover, geopolitical risks benefit the safe-haven buck and support prospects for a further depreciating move for the EUR/USD pair.

Traders now look forward to Tuesday's economic docket – featuring the release of the German ZEW Economic Sentiment Index and Eurozone Industrial Production figures. Later during the North American session, the Empire State Manufacturing Index and speeches by influential FOMC members will drive the USD demand, which, in turn, should provide short-term impetus to the EUR/USD pair.

Economic Indicator

ECB Monetary Policy Statement

At each of the European Central Bank’s (ECB) eight governing council meetings, the ECB releases a short statement explaining its monetary policy decision, in light of its goal of meeting its inflation target. The statement may influence the volatility of the Euro (EUR) and determine a short-term positive or negative trend. A hawkish view is considered bullish for EUR, whereas a dovish view is considered bearish.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.