• Data on Thursday revealed that Eurozone business activity remained weak in October.

• Markets are fully pricing a 25-bps ECB rate cut in December.

• US PMI numbers will show the state of business activity.

The EUR/USD outlook leans south despite a short rebound as data revealed poor business activity in the Eurozone. However, the pair edged higher as the dollar eased amid uncertainty regarding the upcoming US presidential election.

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Data on Thursday revealed that Eurozone business activity remained weak in October. The composite PMI came in at 49.7 compared to forecasts of 49.8. Figures below the 50 mark indicate contraction and weak economic demand. Consequently, market participants have increased bets for another European Central Bank rate cut in December. Markets are fully pricing a 25-bps rate cut in December.

However, ECB’s Christine Lagarde emphasized caution on Wednesday when deciding policy. However, other policymakers have expressed more dovish remarks. Nevertheless, the euro recovered Thursday while the dollar eased from recent peaks ahead of the US presidential election.

For weeks, the greenback has rallied as traders bet on a Trump win and higher inflation. However, a recent Reuters poll showed that Kamala Harris was in the lead, indicating a tight race. The uncertainty has caused some investors to pause and lock in profits before the election.

Meanwhile, market participants await more hints on the future of Fed policy. US unemployment claims will show whether demand remains high in the labor market, which could lower bets for a November rate cut. Meanwhile, PMI numbers will show the state of business activity.

The outlook for Fed policy has shifted to a more gradual one. Moreover, policymakers have assumed a more hawkish tone. Consequently, markets are placing a 29% chance that the central bank will cut rates only once more this year.

EUR/USD key events today

• Unemployment Claims
• Flash Manufacturing PMI
• Flash Services PMI

EUR/USD technical outlook: Bears leading below the 30-SMA

On the technical side, the EUR/USD price has rebounded to retest the 1.0801 key level. However, the downtrend remains intact since the price recently made a lower low. Moreover, it trades below the 30-SMA, with the RSI below 50, in bearish territory.

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Therefore, even if the uptrend continues, it might pause at the 30-SMA resistance. Here, the price will likely bounce lower to continue the downtrend beyond the 1.0750 level. However, if the price breaks above the SMA, the trend might reverse to the upside.

https://www.forexcrunch.com/blog/2024/10/24/eur-usd-outlook-eurozone-business-slump-dampens-outlook/