The EUR/USD pair continued to face pressure during the US trading session on Tuesday (October 8), experiencing a brief rise before hitting resistance and settling at 1.0975, with a marginal increase of 0.01%. The current exchange rate fluctuations are influenced by geopolitical tensions and US economic data, particularly with the dollar maintaining its advantage amid rising tensions in the Middle East and strong performance in the US job market. The latest US employment report was impressive, solidifying the market's expectations for a more hawkish Federal Reserve rate policy.
Despite the uncertainty surrounding the future direction of the Middle East situation, the market generally believes the dollar will remain solid. Short-term expectations for a significant Fed rate cut have diminished, particularly as the upcoming US inflation data is unlikely to alter these expectations. Additionally, despite surprising growth in German industrial data, the European Central Bank is still likely to cut rates by 25 basis points next week, exerting further downward pressure on the euro.
From a technical standpoint, the EUR/USD has fallen below the critical support range of 1.1000 to 1.1025, setting a temporary lower low, indicating a bearish technical prediction. Current resistance levels are concentrated above 1.1000, and failure to break through this area would likely result in a downward trend for the EUR/USD, with the next key support level near 1.0900, followed by the 200-day moving average at 1.0875.
In the coming days, the market will closely watch the upcoming US inflation data, especially the CPI and PPI figures, though these are not expected to have a significant impact on the Fed's policy stance. September's core CPI is expected to rise 0.2% month-over-month, slightly lower than August's 0.3%. Unless there is a major surprise in the inflation data, the dollar's strength and the euro's downward trend may continue.
In addition to economic data, geopolitical factors will continue to influence the euro's movement. While there are no signs of further escalation in the Middle East, there is also no clear easing. This uncertainty might drive up oil prices, further pressuring the euro.
Meanwhile, with the US presidential election approaching, defensive investment preferences will also support the dollar. According to the latest polls, Kamala Harris's lead over Trump in the White House race has slightly narrowed, but the contest remains close. If Trump's odds increase, it could further dampen the expected trend for EUR/USD.
Overall, the outlook for the EUR/USD remains biased towards the downside, with no significant rebound opportunities in the short term.
