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EUR/USD is showing weakness despite a hawkish rate cut. Positive U.S. economic data is putting pressure on the pair at higher levels, with a recent low of 1.1083 and currently trading around 1.0845.
The European Central Bank (ECB) has cut rates by 25 basis points as anticipated, reducing the deposit facility rate to 3.25% and the main refinancing rate to 3.40%, down from 3.65%.
The ECB noted that the disinflation process is progressing well and stated, "We will maintain policy rates at restrictive levels as long as necessary." They expect inflation to rise before eventually falling, with any further actions being dependent on incoming data.
U.S. Economic Data:
In September 2024, U.S. retail sales exceeded expectations, increasing by 0.4% month-over-month, compared to a forecast of 0.3%. This follows a slight rise of 0.1% in August. Overall retail sales totaled approximately $714.4 billion, marking a year-over-year increase of 1.7%.
The retail sales control group increased by 0.7%, well above the expected 0.3%.
Core retail sales rose by 0.5%, surpassing the estimate of 0.1%.
The number of unemployment benefit claims fell by 19,000, bringing the total to 241,000, down from 260,000 the previous week.
Technical Analysis:
Intraday bias remains bearish as long as resistance holds at 1.1000. The pair is trading below the 34 and 55 EMA, as well as the 200 and 365 Hull moving averages on the 4-hour chart.
Near-term resistance is found around 1.08765; a breakout above could lead to targets at 1.0910, 1.0960, 1.1000, and 1.1070. Major bullish continuation is only anticipated above 1.1150, which could push the pair to 1.11780 and 1.12150.
Immediate support is at 1.0830; breaking below this level may drag the pair down to 1.0800 and 1.0770.
Indicators (4-Hour Chart):
CCI (50) - Bearish
Average Directional Movement Index - Bearish. All indicators signal a bearish trend.
It is advisable to sell on rallies around 1.08780-1.0880, with a stop-loss set at 1.0925 and a target price of 1.0800.
