13.10.202610:47 Analisis Forex & Kajian: EUR/USD – Price Analysis and Forecast: The Pair Maintains a Bearish Outlook

On Tuesday, at the start of the European trading session, EUR/USD remained relatively stable, making tentative attempts to move higher. However, expectations of a tighter monetary policy stance from the US Federal Reserve and rising US Treasury yields could support the dollar and prevent further appreciation of the currency pair.

On Monday, Federal Reserve Bank of Cleveland President Beth Hammack stated that a tighter monetary policy stance may be necessary to contain inflation and prevent inflation expectations from becoming entrenched in the economy.

According to the CME FedWatch Tool, market participants assign an 80.6% probability to interest rates remaining unchanged at the upcoming meeting, while the probability of a rate hike at the December meeting stands at nearly 84.7%.

Key US inflation reports due later this week will provide important guidance for the Fed's future policy decisions. The Consumer Price Index (CPI) report will be released on Wednesday, followed by the Producer Price Index (PPI) and retail sales data on Thursday.

In September, headline CPI is expected to rise by 3.7% year over year, compared with 3.4% in the previous month. Core CPI is also forecast to increase by 2.5% year over year, slightly above the 2.4% recorded in August. Any signs of accelerating inflation in the United States could strengthen the Federal Reserve's resolve to maintain a restrictive monetary policy to contain persistent price increases.

Meanwhile, the euro remains under pressure as disagreements over France's budget continue to reinforce the bearish outlook for EUR/USD.

ING analysts report that discussions on France's new budget are scheduled to take place in parliament this week. The proposal includes "an additional €43 billion in spending cuts." They believe that "significant progress on this issue is unlikely." ING added that the government may have to "adopt the budget by decree," as political opponents are likely to refrain from attempting to bring down the government, which could further exacerbate France's debt problems. The bank notes that "this is hardly a positive factor for the euro."

ING also emphasizes that "speculators and the currency options market are currently displaying a clear bearish bias toward EUR/USD, although positioning is beginning to appear somewhat overstretched." According to the analysts, "unless significant US policy mistakes prompt investors to question the merits of maintaining long dollar positions, macroeconomic factors will continue to weigh on EUR/USD." In the short term, "a further decline toward the 1.1100–1.1120 level appears more likely."

Fed representative Hammack is also taking a hawkish stance, with the Fed's rhetoric highlighting the risk of inflation expectations becoming entrenched.

Hammack adopted a more hawkish position, receiving a score of 8.4 out of 10 on the FXS Speechtracker scale, well above the historical average of 7.5. This signals a stronger inclination toward monetary tightening than the baseline scenario would suggest. The emphasis on the need to raise interest rates and maintain a restrictive policy to bring inflation down to the 2% target, together with concerns that inflation expectations could become entrenched amid substantial demand-driven price increases and "neutral" financial conditions, points to a preference for prompt but measured rate adjustments to maintain a restrictive monetary policy stance.

Hammack's efforts to clarify the Fed's policy reaction framework, along with her warning that companies plan to raise prices by more than their cost increases, underscore a deliberate effort to reshape market expectations and support the dollar by keeping interest rates elevated for an extended period.

The FXS Fed Sentiment Index rose by 0.59 points to 138.92, confirming the hawkish tone of the Fed's communication, as the reading remains significantly above the neutral level of 100. Combined with the high FXS Speechtracker score, this increase suggests that markets should continue to factor in the prospect of tighter monetary policy, which generally supports the dollar against the euro and the yen.

From a technical perspective, the daily chart indicates that EUR/USD retains a bearish bias in the near term, trading below key moving averages.

The nearest resistance level is the psychological 1.1200 level, followed by the 9-day exponential moving average (EMA). However, the bulls still have a long way to go before bearish pressure begins to ease. Support is located at 1.1150. The oscillators are in negative territory, confirming the bears' advantage. However, the Relative Strength Index (RSI) is in oversold territory, suggesting the possibility of a correction. Any corrective rebound, however, is likely to be viewed as a selling opportunity. The path of least resistance remains to the downside.