EUR/USD Decline Amid Strong US Dollar Ahead of Key Economic Data

As forecasted in our previous analysis, the EUR/USD pair remains under bearish pressure, continuing its descent over the past two days, reaching around 1.09300 during the London session. The latest Commitment of Traders (COT) report indicates that retail traders remain bullish on the pair. Despite this, the price is approaching one of the two demand areas we've identified, though we are currently awaiting a possible bullish impulse if the price drops to the lower demand zone.

US Dollar Strength and Market Sentiment
Meanwhile, the US Dollar (USD) remains near its highest level since mid-August as traders have adjusted their expectations regarding a potential 50 basis points (bps) rate cut by the Federal Reserve (Fed) in November. The likelihood of such a cut has been largely priced out, with current market sentiment suggesting a 20% chance that the Fed will keep rates unchanged at its next meeting. This expectation was reinforced by the hawkish tone in the FOMC minutes released on Wednesday, which underpinned the USD's strength.

DXY ( USD ) Daily Chart

The elevated yield on the 10-year US Treasury bond, which remains above the 4% threshold, continues to support the US Dollar, acting as a headwind for the EUR/USD pair. The stronger USD, coupled with market sentiment around potential Fed actions, has weighed heavily on the Euro in recent sessions.

Upcoming Economic Data and Market Impact
Today brings several important economic releases that could inject volatility into the market, including:

Core CPI (Consumer Price Index)
CPI y/y
CPI m/m
Unemployment Claims

These reports are key indicators of inflation and employment in the United States, and they could shift the market's outlook for the US Dollar. Currently, the forecasts suggest that the data may work against the USD, potentially leading to an initial bullish move in EUR/USD. However, the ultimate impact will depend on how closely the actual data aligns with expectations.

Our Strategy: Waiting for a Key Demand Support
At this time, we are not opening any positions as we await the price to reach the lowest demand support level. A potential bullish reversal may occur once this level is tested, and we’ll be closely monitoring market movements following today's key economic data releases. Patience remains essential as we look for confirmation of a potential bullish setup.

Conclusion
The EUR/USD pair continues its downward trend, driven by USD strength amid expectations of steady interest rates from the Federal Reserve. As key economic data is released today, we anticipate increased market volatility, which could present trading opportunities. For now, we are waiting for the pair to reach critical demand levels before considering any new positions. Stay tuned for further updates as we continue to monitor market developments.

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