Daily Technical Analysis: EUR/USD Trades Below 1.100 on Possible ECB Rate Cuts

The EUR/USD is attempting to recover last session’s losses and is trading around 1.090 during Monday’s Asian session. However, the EUR/USD’s gains may be limited, as recent Eurozone inflation data has increased expectations for a rate cut by the European Central Bank (ECB) at its next meeting.

With headline inflation close to 2% and longer-term inflation estimates remaining around the same level, the ECB has sufficient justification to continue easing monetary policy. In addition, mixed Eurozone Gross Domestic Product data in the previous week has reinforced expectations of a possible rate cut by the ECB.

On Friday, U.S. economic data raised doubts about the likelihood of an aggressive rate cut by the Federal Reserve at its September meeting. The U.S. Bureau of Labor Statistics reported that nonfarm payrolls added 142,000 jobs in August, below the estimated 160,000 but an improvement over the revised July figure of 89,000 jobs. The unemployment rate fell to 4.2%, in line with estimates, from the previous month’s rate.

According to CME’s FedWatch tool, markets anticipate at least a 25 basis point rate cut by the Fed at its September meeting. The likelihood of a 50 basis point cut has decreased to 29.0%, down from 30.0% a week ago.

Federal Reserve Bank of Chicago President Austan Goolsbee stated on Friday that Fed officials are aligning with the market view that an interest rate tightening is imminent, as reported by CNBC.

EUR/USD Daily Technical Analysis for September 9:

The expected trading range for EUR/USD is between 1.10050 and 1.12300.

The EUR/USD price has risen significantly since the end of June, though not without challenges. Financial institutions appear to favor a dovish stance by the Fed. However, concerns about a potential tightening of the Fed’s rate policy have created market nervousness over the past week. Many analysts doubt a slowdown in the US economy.

Early trading this week is expected to be brisk. If the EUR/USD holds the support levels from last week, it may indicate that traders believe the currency pair has found a solid base. A more dovish stance by the ECB and the Fed could encourage attempts for slightly higher values.