And you, friends, no matter how you sit down, you are still not good at musicians. The split within the Governing Council and investors' fears that the European Central Bank will step on the same rake make the obviously bullish factor for EURUSD an aggressive increase in the deposit rate insignificant. The derivatives market is confident in the increase in borrowing costs by 75 bps at the meeting on September 8, but instead of rising, the euro falls. Before the regional currency is a bad example of the British pound, the collapse of which was provoked by the fact that the Bank of England could bring the country to a deep recession.

Indeed, tightening monetary policy when the armed conflict continues in Ukraine and the energy crisis is raging in the eurozone is an extremely bold decision. Partly forced, as inflation has never been so high in the history of the eurozone. And 9.1% is far from the limit. Consumer prices will soon hit double digits. Not surprisingly, derivatives expect the deposit rate to rise to 2% by February. This is significantly higher than a few weeks ago, but this fact does not help the euro at all.

Dynamics of expectations for the ECB rate

Investors are afraid that the ECB may step on the same rake as in 2011, when, under the leadership of Jean-Claude Trichet, raised borrowing costs for the last time before July 2022. Then it provoked a recession, a euro crisis and forced the central bank to take a step back by loosening monetary policy. The same scenario is not ruled out now. According to the head of the Bank of Latvia, Martins Kazaks, if the eurozone is faced with a deep recession in the economy, rates will have to be reduced.

It is quite possible that the reluctance to fall into the same trap will lead to the fact that the deposit rate will increase by only 50 bps, which will be a blow to the EURUSD bulls. On the contrary, its growth by 75 bps could be a signal that ECB President Christine Lagarde has lost her power on the Governing Council. She did not go to Jackson Hole and did not comment on monetary policy for six consecutive weeks.

You will not envy fans of the main currency pair. Along with the problems of the ECB and the currency bloc, its fall to a 20-year bottom is facilitated by an ever stronger US dollar. Investors finally believed that the summer rise of the S&P 500 is not the beginning of a bull market, but a correction within the bear market, and they are selling shares. Their fall strengthens the greenback as a safe-haven asset. Judging by the ISM Purchasing Managers' Index and the latest labor market statistics, the US economy is strong and unlikely to fall into a recession. What can not be said about its European counterpart.

Technically, on the EURUSD daily chart, the renewal of the September low will increase the risks of a continuation of the downward trend in the direction of at least 0.97, where the target for the AB=CD harmonic trading pattern is located. While the main currency pair is trading below parity, we use euro pullbacks to sell it against the US dollar.