Expectations for Fed, ECB policy may see EUR/USD test 1.0800
Oct 1 (Reuters) -EUR/USD struck an 8-session low Tuesday after falling below the 5- and 21-DMAs as investors' expectations for Fed and ECB policy paths weighed on the pair, which could be headed for a fall towards 1.0800.
September euro zone inflation indicated disinflation is persisting, which could lead the ECB to focus more on economic growth as pricing gets nearer to the central bank's inflation target.
Recent euro zone data indicated growth in the bloc has been anemic.
The combination of persistent disinflation and weak growth may give the ECB reason to cut aggressively.
Fed Chair Jerome Powell said Monday the policymakers are likely to stick with 25bps cuts and were in no hurry as data indicated the economy is growing and consumers are spending.
Euribor futures FEIH5 rallied while SOFR futures were stagnant, which tightened the terminal rate spread between the Fed and ECB.
The dollar's yield advantage over the euro is widening as German-U.S. spreads traded at levels not seen since Aug. 22.
The rate and yield differentials helped to drive EUR/USD towards the Sept. 11 daily low and psychological 1.1000 level.
Breaks of those impediments would complete a double top pattern.
Completion of the double top suggests 1.0785/1.0800 could be tested, which is the measured move from the pattern's top to bottom.
For more click on FXBUZ
(Christopher Romano is a Reuters market analyst. The views expressed are his own)
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