The EURUSD currency pair has declined for five consecutive trading days as market participants remain cautious about the Federal Reserve's policy stance in December, resulting in dollar strength and a consequent weakening of the EURUSD. However, the downside potential for the EURUSD may be constrained, given market expectations that the European Central Bank (ECB) is unlikely to implement any additional rate adjustments this year, potentially providing support to the euro. During the ECB's third policy session in October, as anticipated, interest rates were maintained at their current levels. The ECB indicated that inflation prospects remain broadly stable with sustained economic growth, although uncertainties persist. Recent data showed that Eurozone inflation marginally exceeds the ECB's 2% target, and GDP growth in the third quarter surpassed expectations. Additionally, October business surveys reflected an improvement in overall business sentiment. ECB policymakers, François Villeroy de Galhau, noted that the central bank is in a favorable position following October's policy decisions. However, Villeroy de Galhau emphasized that this position is not static. Latvian Central Bank Governor Mārtiņš Kazāks stated that the inflationary and growth risks in the Eurozone are more balanced. Kazāks added that the ECB will act when necessary but should avoid hasty responses.

Federal Reserve Chairman Jerome Powell indicated at last week's post-meeting press conference that the likelihood of a rate cut in December remains uncertain. Powell also warned that policymakers might need to adopt a cautious stance until official economic data is released. According to the FedWatch tool from the Chicago Mercantile Exchange, the probability of a December rate reduction has decreased to 65% from 94% a week earlier. Due to the prolonged government shutdown, traders are exhibiting increased caution, which could challenge the U.S. dollar and heighten concerns about the U.S. economic outlook. The political deadlock in Congress over a Republican-supported appropriations bill has entered its sixth week, with no signs of resolution in the near term. Meanwhile, federal employees across the country face unpaid leave, further escalating the uncertainty surrounding economic prospects.

Following a death cross signal in the 1D timeframe of the EURUSD MACD, with the MACD line and signal line crossing below the zero-axis, this indicates a transition into a downtrend. The Bollinger Bands are expanding downward, and the SMAs are diverging downward, with price oscillating along the EMA12. The RSI at 37 suggests bearish market sentiment, as the price has broken below 1.16 again with weak bullish momentum, likely retracing towards the EMA200 around 1.139. In the 4H timeframe, Bollinger Bands are narrowing, and after the MACD generated a golden cross, the MACD line and signal line are rallying back toward the zero-axis but still remain some distance away, implying the rebound is incomplete. The RSI at 40 shows higher lows, indicating a gradual easing of bearish sentiment, with resistance forming around the EMA50 and EMA200 levels. It is recommended to go short at the highs in the short term.

Trading Direction: Sell

Entry Price: 1.152

Target Price: 1.12

Stop Loss: 1.175

Support: 1.145, 1.14, 1.12

Resistance: 1.182, 1.192, 1.2