Market Analysis

Eurozone Business Activity Slumps, Raising ECB Rate Cut Expectations as EUR/USD Faces Downside Pressure

Dupoin · 24 Sep 202420.7K Views

EURUSD

Prediction: Increase

Fundamental Analysis:

Recent data from S&P Global reveals a sharp decline in business activity across the Eurozone this month. The services sector has stalled, and the downturn in manufacturing has intensified. These weak figures are fueling expectations that the European Central Bank (ECB) may cut interest rates further this year. The market is currently pricing in around a 77% likelihood of a 25 basis point rate cut during the ECB’s October meeting. In contrast, U.S. business activity has remained steady in September, though the rising cost of goods and services, which increased at the fastest pace in six months, hints at potential inflationary pressure. S&P Global's composite PMI for the U.S., which covers both the manufacturing and services sectors, stood at 54.4 in September, slightly down from August’s 54.6 but still indicating economic growth, as any reading above 50 signifies expansion.

Technical Analysis:

On the 4-hour chart, EUR/USD shows a near-term bias to the downside. The pair has found temporary support around the 100 SMA, but sellers have prevented significant gains, particularly near the 20 SMA, which lacks clear directional movement. Technical indicators remain in negative territory, with the RSI indicating bearish momentum, suggesting a possible lower low for the week. Key support levels are located at 1.1090, followed by 1.1050, while resistance is seen at 1.1160 and 1.1200.

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