Euro (EUR) Forecast: EUR/USD, EUR/GBP Crumble as Rate Cut Talk Gets Louder
The Euro has sold off against a range of other currencies this week as expectations of ECB rate grow and bond yields slump.
EUR/USD Forecast – Prices, Charts, and Analysis
- The ECB may be the first major central bank to cut interest rates next year.
- The latest market pricing shows five 25 basis point rate cuts are seen in 2024.
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Most Read: Euro Area Inflation Falls Sharply, EUR/USD Slips on Heightened Rate Cut Expectations
Stagnating growth and falling inflation is opening the way to a raft of ECB interest rate cuts next year with a total of over 125 basis points now baked into the market. It may well be that out of the major central banks that the ECB is the first cab off the rank to reduce rates with current market pricing expecting a 25bp cut at the April 11th meeting. The latest driver behind this week’s move was Thursday’s Euro Area inflation report that showed price pressures across the block dropping sharply (see story above).
As expectations of rate cuts grew, the yield on the 2-year German Schatz dropped sharply, losing over 40 basis points on the week, a substantial move for a short-dated bond.
German 2-Year Schatz Yields
Next week’s economic calendar includes the final third quarter GDP reading that is forecast to show that the Euro Area economy contracted on a q/q basis. Falling inflation and a contracting economy will give the ECB the justification it needs to start cutting rates, and quickly.
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How to Trade EUR/USD
Against this background, the Euro was always at risk of falling sharply. EUR/USD turned sharply and fell out of a bullish channel that had been directing the pair higher over the last two weeks. The pair has now fallen below the 23.6% Fibonacci retracement at 1.0865 and if EUR/USD opens below here on Monday then further losses may be seen.
EUR/USD Daily Chart
IG Retail trader data 46.61% of traders are net-long with the ratio of traders short to long at 1.15 to 1. The number of traders net long is 22.04% higher than yesterday and 6.58% higher than last week, while the number of traders net short is 8.22% lower than yesterday and 7.81% lower than last week.
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of clients are net long.
of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | 2% | -11% | -5% |
| Weekly | 16% | -20% | -6% |
While EUR/USD has fallen, the move lower in EUR/GBP over the last ten trading sessions is even more aggressive with the pair printing nine red candles and seven in a row. Near-term support may cut in around 0.8549 ahead of a cluster of multi-month lows all the way down to the 0.8500 zone. The break below all three simple moving averages at the start of the week leaves any upside in the pair as limited at best.
EUR/GBP Daily Chart
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What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
























