EUR/USD Bearish Bias Dominates Amid Stronger USD & Critical CPI Data Anticipation - Analysis & Forecast

The EUR/USD pair exhibits a clear bearish bias across multiple timeframes, driven by persistent US Dollar strength and a cautious stance from the European Central Bank. Price action consolidates recent losses, with the pair trading below key moving averages, reinforcing underlying selling pressure. The US Dollar gains traction from hopes of an impending government shutdown resolution and growing expectations of a US-China trade consensus. While ECB President Lagarde's speeches today and tomorrow offer potential intraday volatility, the primary focus for traders shifts to the high-impact German and Eurozone Flash PMIs and especially the delayed US CPI data, all scheduled for October 24. These fundamental catalysts are expected to dictate the pair's near-term trajectory, with a strong US CPI print poised to reinforce the established bearish technical structure and drive further downside towards psychological support levels.

Technical Analysis

Multi-Timeframe Market Structure

The EUR/USD pair maintains a strong bearish posture across the daily, hourly, and 30-minute timeframes. On the daily chart, price closed significantly lower in the previous session, decisively breaking below both the EMA20 and EMA50. This breakdown, combined with a negative and declining MACD, indicates robust bearish momentum. The RSI, while neutral, sits below 50, supporting the downside, and the ADX at 24.49 suggests a developing downtrend. The Parabolic SAR, positioned above price at 1.15662, actively reinforces the bearish outlook. This daily bearish structure aligns with the fundamental backdrop of a strengthening US Dollar and a relatively dovish ECB, suggesting that the current downtrend has fundamental justification for sustainability.

The medium-term H4 timeframe also confirms a bearish bias, with price trading below all key EMAs (20, 50, 200). Although the MACD is barely positive, indicating a loss of prior upward momentum, the overall trajectory remains flat to negative. The RSI is neutral at 43.59, and the Stochastic is deeply oversold at 3.51, which suggests potential for a near-term corrective bounce. However, the ADX at 19.35 implies a lack of strong trending conditions on this timeframe, indicating consolidation within the broader daily downtrend. The Parabolic SAR at 1.16893 acts as a dynamic resistance level.

Shorter-term intraday charts (H1/M30) firmly support the bearish outlook. On H1, price trades below the EMA20 and EMA50, with MACD negative and declining, and RSI at 35.68, signaling strong selling pressure. The Stochastic is extremely oversold at 5.53. The M30 chart echoes this strong bearish momentum, with MACD declining, RSI at 34.98, and a high ADX at 35.26 confirming a robust intraday downtrend. While deeply oversold Stochastic readings on both H1 and M30 caution against immediate new short positions without a pullback, the overall multi-timeframe alignment points to continued downside pressure.

Critical Price Levels & Momentum Assessment

The market is currently in a moderate to strong downtrend on shorter timeframes, transitioning towards a developing bearish trend on higher timeframes. The strong bearish momentum on H1/M30, evidenced by declining MACD and low RSI values, is a key technical feature. However, the deeply oversold Stochastic readings on H4, H1, and M30 suggest that price may either consolidate or experience a minor corrective bounce before resuming its decline. The moderate volatility, with D1 ATR at 0.005759, provides ample room for intraday movements.

Resistance:

• 1.16420 (M30 EMA20, immediate intraday resistance)
• 1.16488 (H1 EMA200, prior support)
• 1.16550 (H4 previous high, psychological resistance)

Support:

• 1.16320 (Intraday low, just below current price)
• 1.16200 (Psychological level, potential extension of intraday low)
• 1.16000 (Psychological level, stronger support)

These technical levels are critical. A sustained break above 1.16550 would invalidate the immediate bearish bias, while a break below 1.16000 would significantly extend the current downtrend, aligning with renewed US Dollar strength from potentially strong US economic data.

Fundamental Market Drivers

Central Bank Policy & Economic Outlook

The divergence in central bank policy expectations remains a primary driver for EUR/USD. The European Central Bank (ECB) continues to maintain a "wait-and-see" stance on interest rates, with several officials stating that rates should remain at current levels. This position is reinforced by softer-than-expected German Producer Price Index (PPI) data for September, marking the third consecutive monthly decline. Bundesbank President Joachim Nagel's comments about remaining in "wait-and-see mode" align with the ECB's cautious approach, suggesting no urgency for further rate adjustments this year. This provides a dovish undertone for the Euro.

In contrast, the US Dollar benefits from growing expectations for Federal Reserve monetary policy, particularly ahead of the delayed US Consumer Price Index (CPI) data. Market participants are fully pricing in a 25-basis-point rate cut at the Fed’s October 29 meeting, with odds at 97%. However, any upside surprise in the upcoming US CPI data could challenge these dovish expectations, leading to a hawkish repricing and further strengthening the US Dollar. The US economic outlook, bolstered by hopes of a swift resolution to the government shutdown, also contributes to USD outperformance. The technical breakdown of EUR/USD below key moving averages aligns with this fundamental divergence, where a relatively stagnant Eurozone economic outlook contrasts with a resilient US economy and a potentially hawkish Fed.

Market Sentiment & Risk Environment

Market sentiment currently favors the US Dollar, driven by multiple tailwinds. Hopes that the ongoing US government shutdown will end this week, as expressed by US economic adviser Kevin Hassett, provide a significant boost to risk appetite and the Greenback. Furthermore, growing expectations that the US and China will reach a consensus during President Trump and leader Xi Jinping's meeting at the Asia-Pacific Economic Cooperation meeting later this month are contributing to positive sentiment. This reduces geopolitical uncertainty, typically favoring the US Dollar as a safe-haven asset, but also signaling potential for global economic stability.

For the Euro, while it shows strength against other major currencies due to expectations of no further ECB rate cuts this year, its performance against the US Dollar is subdued. The upcoming speeches by ECB President Lagarde are important for intraday sentiment, but their impact is likely to be overshadowed by the high-impact US CPI and PMI data later in the week. The technical bearish structure of EUR/USD aligns with this fundamental backdrop, where a stronger US economic narrative and reduced domestic political risk (shutdown resolution) support the US Dollar, thereby pushing EUR/USD lower. Any deterioration in US-China trade talks or prolonged government shutdown could introduce risk-off sentiment, which historically benefits the safe-haven USD, further reinforcing the bearish technical scenario for EUR/USD.

Integrated Trading Execution

Primary Trading Scenario

• Bias: Bearish - The multi-timeframe technical structure, particularly the daily breakdown below key EMAs and declining MACD, combined with sustained US Dollar strength driven by US shutdown resolution hopes and anticipation of potentially firm US CPI data, strongly supports a bearish continuation.
• Trigger/Entry: A short entry on a pullback towards the 1.16420 - 1.16450 zone (M30 EMA20 / H1 EMA20). Confirmation requires an M30 candle close below 1.16420 after this retest, indicating renewed selling pressure aligning with the dominant bearish trend.
• Stop-Loss: Place stop above 1.16645. This level is strategically positioned above the H4 previous high (1.16550) and includes a 1.25x H1 ATR buffer, offering protection against short-term corrective spikes while maintaining a favorable risk-reward profile.
• Profit Targets:
  • Target 1: 1.16000 (Psychological support). This level represents the daily cloud bottom and a significant psychological barrier, likely attracting initial profit-taking.
  • Target 2: 1.15700 (Extension towards D1 SAR). This target aligns with the daily Parabolic SAR and represents a further extension of the bearish trend, potentially fueled by strong US CPI data.
• Session Context: Optimal for execution during the London session open, anticipating trend continuation after Asian session consolidation. The liquidity increase during the London session can provide the necessary momentum for the bearish setup.
• Event Consideration: This scenario is pre-event, but profit targets must be managed closely ahead of the high-impact German PMI and US CPI data scheduled for October 24th, as these events carry substantial risk of market shifts.

Alternative Market Scenario

• Invalidation: A sustained break and H1 candle close above 1.16550 (H4 previous high). This break would signal a significant shift in short-term momentum, potentially driven by dovish surprises from ECB President Lagarde or weaker-than-expected US economic data.
• Bias: Bullish Bounce - A temporary bullish correction driven by short-covering or a fundamental catalyst that undermines immediate US Dollar strength.
• Trigger/Entry: A long entry on a confirmed break and close above 1.16550 on the H1 timeframe. This indicates that buyers have overcome key resistance, potentially initiating a corrective rally.
• Stop-Loss: Place stop below 1.16325, which is below the M30 EMA20 (1.16420) and includes a 1.25x H1 ATR buffer.
• Profit Targets:
  • Target 1: 1.16700 (H4 EMA200). This level represents a key medium-term moving average, likely acting as initial resistance.
  • Target 2: 1.16890 (H4 SAR). This target aligns with the H4 Parabolic SAR, indicating a more extended corrective move.
• Session Context: This bounce scenario is more likely to materialize during the early London session if price finds strong bids after Asian consolidation, potentially on specific comments from ECB officials.
• Event Consideration: This alternative is highly susceptible to negative news flow from upcoming EZ/US data later in the week, particularly if US CPI comes in strong, which would quickly invalidate a bullish bounce.

Risk Management & Catalyst Analysis

Trade Risk Assessment

The confluence quality for the primary bearish scenario is Medium. While shorter timeframes show strong bearish alignment, the H4 timeframe exhibits weaker trend strength, and deeply oversold stochastic readings across multiple timeframes introduce a degree of uncertainty regarding immediate downside continuation without a correction. The daily bias is bearish, but the previous session's strong bearish candle might trigger a pause or a minor retrace. Intraday-specific risks include low liquidity during the Asian session, which can lead to choppy price action. The upcoming high-impact economic events on October 24th, particularly the German PMI and US CPI data, pose significant event risk, potentially invalidating technical setups and increasing volatility. Traders must exercise caution and consider reducing position sizes around these releases.

Economic Calendar & Event Impact

The upcoming economic calendar features several high-impact events that will significantly influence EUR/USD:

• EZ ECB President Lagarde Speaks (Today, 11:00 UTC): Impact: Medium - Any hawkish or dovish shifts in rhetoric regarding future ECB policy or economic outlook could induce intraday volatility.
• EZ ECB President Lagarde Speaks (Tomorrow, 12:25 UTC): Impact: Medium - Another opportunity for the ECB President to influence market sentiment and potentially spark intraday moves.
• US Existing Home Sales (October 23, 14:00 UTC): Forecast: 4.06M, Previous: 4.00M - Impact: Medium - A key housing market indicator; stronger-than-expected data could support USD.
• FR Flash Manufacturing PMI (October 24, 07:15 UTC): Forecast: 48.2, Previous: 48.1 - Impact: Medium - Indicates manufacturing sector health in France; a weak reading would weigh on EUR.
• FR Flash Services PMI (October 24, 07:15 UTC): Forecast: 48.7, Previous: 48.9 - Impact: Medium - Provides insight into the services sector in France; a decline could signal economic weakness.
• GE Flash Manufacturing PMI (October 24, 07:30 UTC): Forecast: 49.5, Previous: 48.5 - Impact: High - Critical for Eurozone's largest economy; a strong print could provide temporary EUR support, while a weak one reinforces bearish sentiment.
• GE Flash Services PMI (October 24, 07:30 UTC): Forecast: 51.0, Previous: 52.5 - Impact: High - Key indicator for German services sector; a significant decline from previous could weigh heavily on EUR.
• EZ Flash Manufacturing PMI (October 24, 08:00 UTC): Forecast: 49.8, Previous: 49.5 - Impact: Medium - Overall Eurozone manufacturing health; a reading below 50 indicates contraction, bearish for EUR.
• EZ Flash Services PMI (October 24, 08:00 UTC): Forecast: 51.2, Previous: 51.4 - Impact: Medium - Overall Eurozone services health; a lower-than-expected reading could dampen EUR sentiment.
• US Core CPI m/m (October 24, 12:30 UTC): Forecast: 0.3%, Previous: 0.3% - Impact: High - Crucial inflation data for Fed policy; a higher print would significantly boost USD and reinforce EUR/USD downside.
• US CPI m/m (October 24, 12:30 UTC): Forecast: 0.4%, Previous: 0.4% - Impact: High - Headline inflation, closely watched by the Fed; upside surprise strengthens USD.
• US CPI y/y (October 24, 12:30 UTC): Forecast: 3.1%, Previous: 2.9% - Impact: High - Annual inflation rate, a key determinant of Fed's long-term policy outlook; a higher reading would be very USD positive.
• US Flash Manufacturing PMI (October 24, 13:45 UTC): Forecast: 51.9, Previous: 52.0 - Impact: High - Manufacturing sector health; a stronger reading supports the US economic narrative and USD.
• US Flash Services PMI (October 24, 13:45 UTC): Forecast: 53.5, Previous: 53.9 - Impact: High - Services sector health; a robust reading further underpins USD strength.
• US Revised UoM Consumer Sentiment (October 24, 14:00 UTC): Forecast: 54.7, Previous: 55.0 - Impact: Medium - Consumer confidence indicator; a significant deviation can influence market risk sentiment and USD.

These events collectively shape Federal Reserve and ECB policy expectations and will determine near-term EUR/USD direction. The cluster of high-impact US and Eurozone data on October 24th presents substantial event risk, requiring traders to reduce position sizing by 50% for any trades held into these releases.

Synthesized Market Outlook

The EUR/USD outlook remains predominantly bearish, anchored by a strong technical downtrend across multiple timeframes and a fundamental landscape favoring the US Dollar. The anticipation of a resolution to the US government shutdown and potential US-China trade deal provide tailwinds for the Greenback, while the ECB's cautious "wait-and-see" stance and softer Eurozone economic data (like German PPI) offer little support for the Euro. Critical monitoring levels include the immediate resistance at 1.16420 and the more significant 1.16550, a break above which could signal a temporary bullish correction. On the downside, a decisive break below 1.16000 would accelerate the bearish momentum. The market remains sensitive to upcoming ECB President Lagarde's speeches, but the real test for EUR/USD will be the cluster of high-impact German/Eurozone PMIs and, more critically, the US CPI data on October 24th. A strong US inflation print is likely to reinforce the bearish technical structure, pushing the pair towards the 1.15700 target. Conversely, a significantly weaker US CPI or unexpected hawkish shift from the ECB would be required to challenge the prevailing bearish bias and trigger a more substantial rebound.