FxNews—In today’s comprehensive EURUSD technical analysis, we will first scrutinize the current economic conditions in the Euro and then meticulously delve into the details of the technical analysis of the EURUSD pair.
ECB Halts Interest Rate Hikes
Reuters—In its latest monetary policy rendezvous this October, the European Central Bank has pressed the pause button on its interest rate escalation, maintaining rates at peak levels unseen in many years. This halt disrupts the upward trend in rates consistent over the past 15 months. Policymakers are now adopting a more prudent stance, opting to closely observe and assess future economic indicators. This comes amid a slight relaxation in inflationary pressures and mounting anxieties about a potential recession.
After a series of ten successive rate increments starting in July 2022, the central bank’s key rates have soared, with the primary refinancing operations rate reaching a zenith of 4.5%—a figure last witnessed 22 years ago—and the deposit facility rate climbing to an unprecedented 4%. The ECB has articulated its commitment to reigning inflation to its 2% target in the forthcoming period, declaring that the current elevated rates will be sustained as long as necessary to meet this aim.
Looking Ahead: ECB’s Monetary Policy Outlook
Subsequently, on Thursday, the European Central Bank is anticipated to maintain a status quo on interest rates, marking a stark contrast to the persistent hikes over the past year and a quarter. The policy shift towards caution comes in response to the softening inflation and the increasing evidence of a significant economic deceleration, sparking fears of a recession just around the corner.
Breaking away from the aggressive rate increases—the most recent of which have pushed the refinancing rate to heights not seen in over two decades—the ECB is set to deliberate how long these rates should remain at their current elevated plateau. In tandem, policymakers are expected to debate how the bank should decrease its sizable balance sheet, accumulated through government debt purchases.
EURUSD Technical Analysis – Beaks Bearish Channel
The EURUSD currency pair has recently made a significant move. It has managed to break free from the bullish channel it previously traded in and is now positioned below the crucial 1.059 pivot point. This shift in trading position indicates a potential change in market sentiment.
The Relative Strength Index (RSI), a key technical indicator, is currently hovering below 50. This is often interpreted as a bearish signal, suggesting that the market could be entering a period of decline. Furthermore, the EURUSD pair is trading below the Ichimoku cloud, another influential indicator traders use to identify potential price trends and reversals.
If the bears can maintain their hold and keep the EURUSD below this level, we will likely see a continuation of this downward trend. The first target for this potential decline is set at 1.049. However, as with all trading scenarios, monitoring market conditions closely and adjusting strategies accordingly is essential.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.
