Ella 
On Tuesday, the euro fell lower against the dollar for the second consecutive day and fell to the 1.0890 area in the past hour, returning to the lowest level since August 8 hit the previous day. However, bears will need to wait for a break below the 200-day moving average (SMA) before re-betting ahead of key central bank event risks.
The European Central Bank (ECB) is due to announce a policy decision on Thursday and is expected to cut interest rates again, the third time in this easing cycle, as concerns about sluggish economic growth grow. Additionally, euro zone inflation fell below the European Central Bank’s 2% target for the first time since 2021, providing support for further policy easing. This, in turn, weakened the euro and, coupled with the bullish USD, was a key factor in triggering the EURUSD decline.
The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, is holding near two-month highs amid growing expectations that the Federal Reserve will ease policy. In fact, the market has now completely ruled out the possibility of another significant rate cut by the Federal Reserve in November, which has kept U.S. Treasury yields higher. Additionally, geopolitical risks favor the safe-haven US dollar, supporting the prospect of further EUR/USD depreciation.
Traders now look forward to Tuesday’s economic calendar, which will feature the release of Germany’s ZEW economic confidence index and euro zone industrial production data. Later in the North American session, the New York state manufacturing index and speeches from influential FOMC members will drive dollar demand, providing short-term momentum for EUR/USD.
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