The euro resumed a downward correction yesterday paired with the US dollar, even although the US Federal Reserve may lower interest rates again tomorrow. First of all, the pressure on the Euro is related to the risks of introducing additional trade duties by the United States.

Yesterday, the US President said he was ready to introduce additional duties for the EU because the block subsidizes Airbus SE. This was also reported by the EU Commissioner for Trade Cecilia Maelstrom. The Trump administration's refusal to settle a long-standing trade dispute over aircraft manufacturers and the introduction of new duties related to auto manufacturing could affect EU exports worth $11 billion. The negative market reaction is not even related to the duties themselves, but to the fact that the US is returning to a trade war with the EU, which will bring the eurozone economy even closer to a likely recession and slow down overall global economic growth.

Yesterday, on his Twitter account, Donald Trump also managed to criticize the actions of Fed Chairman Jerome Powell, saying that neither he nor the Fed as a whole understands anything about managing interest rates, as because of their actions, the Fed pays a much higher price than competing countries. All these statements were made to finally convince the committee to vote tomorrow for the next round of lowering interest rates.

Yesterday's data on producer activity in the area of responsibility of the Federal Reserve Bank of New York were perhaps the key for the whole day. According to the report, activity in September, although growing, was at a slower pace than a month earlier. This happened against the background of a decrease in optimism regarding the conditions for doing business.

According to Fed-New York, the manufacturing index in September was 2.0 points against 4.8 points in August, but the positive value of the index indicates an increase in the activity. Economists had expected the index to be 3.0 points. However, only 27% of respondents reported an improvement in the business environment, and 25%, on the contrary, reported their deterioration.

Yesterday's speech by the chief economist of the European Central Bank, Philip Lane, dealt with the divergence of views of ECB leaders after last week's meeting. This topic was very relevant, as such a serious split in the ranks of the Central Bank has not been observed since its formation. Lane believes that there is nothing wrong with disagreements between the leaders of the regulator, writing it off as a perfectly acceptable debate in the meeting.

Let me remind you that apart from the Netherlands and France, representatives of Germany also spoke against the resumption of the asset buyback program, and this is a weighty argument. However, Lane noted that despite the controversy, the decision that the regulator needed specific action was supported by all participants, the disagreements concerned specific stimulus measures and action on interest rates.

As for the technical picture of the EURUSD pair, it is unlikely that the bearish trend will continue further before tomorrow's Fed decision. The support is seen in the area of 1.0985, while the upward correction of the intraday movement will be limited near the resistance of 1.1035.

GBPUSD

The British pound declined after yesterday's meeting of Boris Johnson and Juncker, which was disappointing, as the parties were unable to build a constructive dialogue. The Prime Minister confirmed that he would not ask for postponements of Brexit and would withdraw the country from the European Union on October 31. The only thing the leaders agreed on was to intensify the discussion and hold daily meetings of negotiators.

The EU said it was unhappy with the outcome of the talks and urged Johnson to find a solution on Brexit before October 31. Thus, all the optimism that was based on rumors at the end of last week that the UK government "has something to offer" the EU, gradually dried up, and traders are again in confusion. Although there are no sellers, those wishing to buy at current highs also decreased.

From a technical point of view, the breakout of the support at 1.2395 will lead to a build-up of pressure on the trading instrument and a larger downward movement to the lows of 1.2345 and 1.2280. If the bulls try to regain the market's position, and it's unlikely to succeed without good Brexit news, then yesterday's resistance of 1.2465 will limit the upward movement, the break of which will lead to a sharp jump of the pair to the maximum area of 1.2535.