EUR/USD Monthly Forecast: Key Insights for October 2023

Robert Petrucci, a seasoned expert in the Forex, commodity, and financial sectors since 1993, emphasizes the importance of risk analysis and advisory services in his work. As an advisor in a Family Office, he adopts a conservative approach to wealth management and investments. Additionally, Robert collaborates with private investors and companies, providing essential financial and management services.

As of the last day of September, the EUR/USD currency pair is trading near the 1.11680 mark. Traders should prepare for a busy October, as volatility is expected to remain a significant factor in the market. The upward trend observed in the EUR/USD during September was hard-fought, but the pair has successfully maintained its bullish trajectory since late June.

This coming Friday, the U.S. will release its Non-Farm Employment Change data and Hourly Average Earnings, which are anticipated to influence the EUR/USD. Financial institutions are still uncertain about the future actions of the European Central Bank (ECB) and the Federal Reserve. Both central banks are expected to implement further interest rate cuts, but the extent of these cuts remains to be seen.

The EUR/USD's recent climb to a high of nearly 1.12150 was a strong bullish indicator from major market players. Although the pair has retraced some gains, it remains close to the 1.12000 level, which is a target for traders holding longer positions. Should the U.S. jobs numbers come in weaker than expected this Friday, it could lead to increased buying pressure on the EUR/USD.

On October 17th, the ECB will announce its Main Refinancing Rate decision. European economic data has been underwhelming, particularly from Germany. The ECB's interest rate cut of 0.25% in September was perceived as overly cautious by many financial institutions, who were hoping for a more aggressive dovish stance. However, given the Fed's 0.50% cut on September 18th, there is a possibility that the ECB may follow suit with a larger cut in mid-October. Nonetheless, uncertainty remains.

The gains in the EUR/USD over the past weeks have mirrored broader trends in the Forex market, but upward movements have often faced downward reversals due to the lack of clear guidance from the Fed and ECB. Despite this, financial institutions generally anticipate that both central banks will maintain a dovish stance in the mid-term, contributing to the upward momentum that has brought long-term values into focus. The current trading range of the EUR/USD is similar to levels seen in July 2023, although a reversal occurred after the July highs. However, the circumstances in October are different, and while some downward reversals are expected, the prevailing sentiment indicates a weakness in the USD that is unlikely to dissipate soon.

The upcoming U.S. election in early November may introduce caution into the market, but the primary focus will be on U.S. economic data and the ECB's rate decision on October 17th. The Fed is set to announce its FOMC Statement on November 7th.

The speculative price range for EUR/USD is projected between 1.10800 and 1.13200. Bullish traders should exercise caution and not take positions blindly. Until the U.S. jobs numbers are released this Friday, the currency pair may experience volatility. The 1.12000 mark will serve as a crucial indicator in the coming days; a breakthrough above this level before the jobs data could signal bullish sentiment from financial institutions. However, sustaining higher levels will depend on weaker-than-expected Non-Farm Employment Change data.

The key question for EUR/USD traders in October is the extent of the ECB's rate cut, which is expected to be around 0.50%. Both U.S. and European economic data will need to remain lackluster for this to occur. Central banks are cautious about potential inflation, but declining crude oil prices may suggest that significant inflation is not imminent. If the EUR/USD can maintain price action comfortably above the 1.12000 level, additional upward momentum may be possible. Day traders are advised to implement risk management strategies and avoid excessive ambition in their trading activities.

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