EURUSD Forecast: Is This a Double Top?

Key Events

• Eurozone Flash CPI dropped from 2.2% to 1.8%
• Eurozone Core CPI dipped from 2.8% to 2.7%
• US ISM Manufacturing PMI stabilized at 47.2
• JOLTS Job Openings increased from 7.71M to 8.04M

Coming Up

• FOMC Member Speeches
• ADP Non-Farm Employment Change
• US Unemployment Claims (Thursday)
• ISM Services PMI (Thursday)
• Non-Farm Payrolls (Friday)
• Unemployment Rate (Friday)

Source: CME Fed Watch Tool

Recent US data has shifted rate cut expectations towards a 25-bps cut in November, now at 63.2%. Interestingly, the 25-bps cut is now viewed as a bullish factor for the US Dollar, while a 50-bps cut is seen as dovish.

Key factors:

• Jerome Powell’s speech affirming the economy’s strength with no fixed timeline for rate cuts
• A 330K rise in JOLTS Job Openings, boosting confidence in the job sector

This stability in the dollar, combined with a dovish tone from the Eurozone after a sharp drop in CPI estimates, has kept the EURUSD below the critical 1.1220 resistance level. Upcoming ISM Services PMI and Non-Farm Payrolls will likely influence rate cut expectations and October trends.

Technical Outlook

EURUSD Forecast: EURUSD – 3-day Time Frame – Log Scale

Source: Tradingview

With a double rebound from the 1.12 resistance zone, the EURUSD appears to be forming a potential double top, though confirmation is still pending. If the pair closes below 1.10, it could solidify the pattern, extending the drop toward the 1.09 support, and a break below that could push it further to 1.08-1.0780.

Alternatively, a rebound from 1.09 could maintain the bullish trend, aligning with the trendline connecting the 2023 and 2024 highs. However, a drop below 1.08 would reinforce downside risks.

High volatility risks can be expected towards Friday’s payroll data, with focus on Fed rate cut expectations, which could influence market direction, alongside escalating Middle East tensions that might strengthen the dollar as a haven.

--- Written by Razan Hilal, CMT – on X: @Rh_waves