EUR/USD: Pressure from the short-term moving average

The euro, a benchmark barometer of risk appetite in the eyes of fund managers, is pausing below the 20-day moving average (in blue) with hopes for international trade. Trump expressed optimism about the signing of a Sino-US trade agreement, the outlines of which have just been negotiated by representatives of the two superpowers.

Furthermore, Brazilian President Luiz Inacio Lula da Silva stated today that he foresees a Brazil-US trade agreement within the next few days, which could ease the tariffs imposed by Trump amid bilateral tensions. "I am convinced that within a few days, we will find a definitive solution between the United States and Brazil, so that life can continue to be beautiful and joyful," Lula told the press in Kuala Lumpur.

On the statistical front, on Friday, traders learned of the first estimates of the PMI activity barometers for services (54.6) and manufacturing (50) in October in the Eurozone.

"The embarassing weakness of the French economy is increasingly weighing on the Eurozone's performance. While the economic situation improved significantly in Germany, the contraction accelerated for a second consecutive month in France. As a result, Eurozone growth, although slightly faster than in September, was much less pronounced than it would have been without the impact of the weak performance of the French private sector," explains Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

Furthermore, traders were reassured by the US consumer price index, a major publication that was significantly delayed due to the reduced workforce due to the shutdown. Excluding food and energy prices, inflation reached 2.9% in September, while economists surveyed by the Wall Street Journal had expected a rate of 3%.

"The September inflation report confirms that tariff increases will have had only a limited effect on inflation in 2025, and in any case, much lower than anticipated," says Bastien Drut of CPR AM. "This report is also very reassuring for the other components of core inflation, namely housing and non-housing services, and will therefore allow the Fed (the US Federal Reserve, editor's note) to focus on the deterioration in the labor market. The rate cuts in October and December seem certain," he continues.

This morning, the IFO business climate index in Germany rose slightly to 88.3, narrowly beating expectations. The "expectations for the coming months" component contributes the most to this encouraging score.

The coming week will be busy in terms of monetary policy, with the outcome of the Fed's Monetary Policy Committee meeting starting on Wednesday. A 25-basis-point cut in key interest rates is the preferred working hypothesis.

Guy Stear, Head of Developed Markets Strategy at Amundi Investments, predicts that "the US Federal Reserve will cut rates in October, December, and then twice more during the second quarter of 2026."

"But the market is also anticipating it, and the more interesting question is whether the Fed's press conference will support the very aggressive cuts built into the curve through early 2027. Another equally important point is how the Fed plans to respond to the decline in liquidity in the short term, given the significant sovereign debt issuance of recent months. If the US Federal Reserve fails to meet the market's very aggressive expectations for rate cuts, we could see a modest rise in 2-year Treasury yields, but they could also be sustained if the Fed begins to increase liquidity in the system."

Right now, the EUR/USD is trading at $1.1635.

KEY CHART ELEMENTS
The previously prevailing bullish oblique (in black on the chart) has now been broken, with a confirmatory pullback. The negative view is proposed below this oblique, while The relative strength index is collapsing. The 20-day moving average (in blue) has just broken at a significant angle from its 50-day counterpart (in orange).

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view is negative on the EUR/USD.

Our entry point is at $1.1642. The price target for our bearish scenario is $1.1013. To preserve the invested capital, we recommend placing a protective stop loss at $1.1761.