Ella 
During the Asian session on Thursday, the EUR/USD currency pair remained on the defensive, currently trading at a one-week low near 1.0560, as the market waited to see the European Central Bank (ECB) interest rate decision.
The European Central Bank raised interest rates for a 10th consecutive time at its September meeting, but that signaled the end of a 14-month battle against inflation as price pressures are easing. Furthermore, the Eurozone economy is slowing and a recession may have begun, making further interest rate hikes increasingly unlikely. That said, this key decision is likely to bring volatility to the euro and provide some significant boost to the EUR/USD pair.
Beyond that, focus will be on discussions about how to reduce the massive government debt portfolio more quickly and how long interest rates need to stay at record highs. Markets are already betting that the European Central Bank’s next move will be to cut interest rates, possibly in the second quarter of next year. Therefore, investors will pay close attention to ECB President Christine Lagarde’s speech at the post-meeting press conference to look for new clues about the central bank’s near-term monetary policy outlook.
As key event risks approach, rising U.S. Treasury yields and a generally weakening risk tone support the dollar’s bullishness, putting some pressure on the EUR/USD currency pair. The 10-year U.S. Treasury yield remains near a 16-year high, around the psychological 5% mark it briefly breached earlier this week, as a growing number of analysts believe the Federal Reserve will stick to its hawkish stance.
Meanwhile, the prospect of further policy tightening by the Federal Reserve continues to fuel concerns about headwinds from rapidly rising borrowing costs. In addition, lackluster corporate performance has heightened concerns about the economic outlook and eroded investor appetite for riskier assets. This, coupled with the risk of further escalation of the Israel-Gaza conflict, has prompted some safe-haven flows into the U.S. dollar and is one of the reasons for EUR/USD’s strength.
The fundamental backdrop above appears to be favorable for bearish traders, suggesting minimal downside resistance for EUR/USD. Therefore, any attempted recovery may still be viewed as a shorting opportunity and may disappear quickly.
