The Euro's losing streak runs on as the Fed matches the ECB's rate hike

The European Central Bank (ECB) increased its deposit rate to 2.50% on September 10, causing the Euro to decline every day since. The US Federal Reserve (Fed) matched the ECB's rate hike on September 12, raising its own rate to 3.75-4.00%, resulting in the largest drop in the ongoing decline. The EUR/USD exchange rate is now trading just above 1.1450, below both its long-run averages, which it hasn't been since early August.

The gap between the Fed's 3.875% midpoint and the ECB's 2.50% is 1.375 points, unchanged since both meetings. The Fed's forecast suggests US inflation won't return to 2% until 2029, while the ECB expects eurozone inflation to be 2.5% next year. Both central banks are above their target rates for years, leaving the lower-paying ECB's currency vulnerable.

Fed Chair Jerome Powell stated that the summer's inflation figures have not shown any improvement, indicating no signal for rate cuts. Eurozone inflation for August will be released on Thursday at 09:00 GMT, with a forecast of 2.4% core inflation, unchanged from the flash. The daily momentum gauge is at 15, its lowest since June, suggesting a bounce is likely at some point.

The Euro's resistance levels are at 1.1500, the 50-day Exponential Moving Average (EMA) near 1.1550, and 1.1600. Its support levels are just above 1.1450, 1.1400, and the early-August base near 1.1350. The bias is bearish below 1.1500. The first target is 1.1400, followed by the early-August base near 1.1350. A daily close above 1.1600 would negate the bearish case.

The Euro is the currency of the 20 European Union countries in the Eurozone, the second most traded globally after the US Dollar, and accounts for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion. The ECB, based in Frankfurt, Germany, sets interest rates and manages monetary policy, targeting price stability and controlling inflation or stimulating growth.

A stronger Euro benefits global investors seeking to park money in regions with relatively high interest rates. The ECB's monetary policy decisions, made by the Governing Council, are crucial for the Euro's value. Economic data, such as GDP, manufacturing and services PMIs, employment, and consumer sentiment surveys, significantly impact the Euro's direction.