EURUSD continues to move in a medium-term downtrend. Within its framework, the bears have another target at the 1.077 level, after which the double top pattern will be completed. Reaching the early August lows may cause a technical pullback in prices, but fundamentally buying the dollar against the euro remains attractive. The latest news only strengthens this position for forex market participants.
According to Goldman Sachs analysts, if Donald Trump wins the US presidential election, the euro-dollar exchange rate could fall by as much as 10%. Introduction of 10% tariffs on imports of all European goods would be painful for the EU economy, which is focused on international trade. At the same time, the US economy is feeling much better, encouraging foreign investors to buy dollar assets.
To remedy the situation, European officials are proposing to accelerate the ECB’s monetary easing cycle. This was announced yesterday by the Governor of the Portuguese central bank, Mario Centeno. In his opinion, a lower level of interest rates will support the GDP growth rates of European countries. According to Bloomberg data, the probability of a 0.5% rate cut at the ECB’s December meeting has reached almost 30%. In early October traders did not consider such a scenario at all.
According to Reuters, more and more members of the European regulator believe that lowering interest rates to a neutral level is not enough to revive the EU economy. In their opinion, borrowing costs must fall below the 2-2.5% range, otherwise the 2-year stagnation of the economy will continue. At the same time, the equivalent figure for the US Fed is 2.75-3%, and there are virtually no votes in favor of even more monetary easing. Under such circumstances, the euro has little chance of strengthening, and the EURUSD rate is likely to keep falling.
The next target for EURUSD sellers is 1.077. Once reached, profit taking and partial closing of short positions may occur, so traders should be cautious.
Consider the following trading strategy:
Sell EURUSD in the range of 1.08-1.082. Take profit — 1.077. Stop loss — 1.085.
