The dollar has been on a tear in the past week or so and that has drove EUR/USD lower to break under 1.1000. Traders have moved to price out the possibility of a 50 bps rate cut by the Fed next month. And with odds of a 25 bps rate cut by the ECB for later this month having grown before that, it marks a divergence for the euro and dollar.
EUR/USD daily chart
From a technical point of view, the inability for buyers to break 1.1200 also marks a significant turnaround in sentiment. The rejection there creates a bit of a double top pattern, which looks to be eyeing a break to 1.0800.
However, that will have to come with breaks of other key technical levels on the charts. For one, the 100-day moving average (red line) at 1.0933 is in play. Then, there will be the 200-day moving average (blue line) at 1.0873 currently after that.
So, sellers will have quite a few layers to chew through in getting there.
The thing is now we have seen traders revert back to a 25 bps rate cut for the Fed for November. So, is there much more hawkish undertones to price beyond that? It’s tough to imagine, unless US data really turns up quite a few more notches in the weeks ahead.
As things stand, it’s now a run of the technicals in my book. And that will determine the next course for dollar sentiment, especially with the likes of USD/JPY nearing the 150.00 mark and GBP/USD slipping back towards its September low near 1.3000.
The next key risk event on the agenda will come later today from the US CPI report. So, let’s see what that has to offer.