- The EUR/USD started last week’s trading around the 1.17300 vicinity, but early on began to show signs of buying action seep into the currency pair.
- The U.S Federal Reserve was a known factor early last week and was anticipated to lower its Federal Funds Rate on Wednesday.
- The currency pair EUR/USD was trading near the 1.18600 realm before the U.S Fed made its FOMC Statement. Upon the interest rate cut being made official the EUR/USD surged to nearly 1.19200. But that is not where the trading story ends, perhaps that is not even where the saga really begins.
- Forex traders including EUR/USD players certainly anticipated last week’s interest cut of 25 basis points from the U.S Fed. What they didn’t know was what the Fed policy rhetoric would be on Wednesday as Jerome Powell spoke.
- The EUR/USD had certainly factored into its value the interest rate cut of 25 basis points before the Fed announcement. Bullish traders were hoping for strong language that showcased a determination that interest rates would not only be cut in this coming October too, but that they would continue to be decreased. That message wasn’t exactly delivered.
Dovish Sentiment For Now with Inflation Concerns Sounded
Instead the Fed while cutting rates and admitting it will likely have to cut in October, then sounded the inflation themed concern that has been shadowing the U.S Central Bank for half a year. Financial institutions reacted to this rhetoric by essentially bringing the EUR/USD back into its known trading waters quickly. After moving above 1.19200 momentarily with a spike, the EUR/USD was back around 1.18600 quickly and then the currency pair started to run into more headwinds.
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By late on Wednesday the EUR/USD was trading near 1.18100 and although it moved to around the 1.18500 mark on Thursday, the currency pair was running out of buyers. The Federal Reserve’s interest rate cut met expectations perhaps a little too much. Financial institutions who had bought the currency pair and leaned into the notion of potentially lower U.S interest rates being delivered steadily over the mid-term, instead were given more warning signs that uncertainty still lingers.
EUR/USD and U.S Growth Numbers This Week
The EUR/USD continued to selloff on Thursday and by Friday the 1.18000 was under early and constant pressure and faltered more. The stronger selling going into this weekend essentially has brought the EUR/USD to marks it saw early last Monday.
- The U.S will release important GDP numbers this Thursday. Friday will see a key inflation report from the U.S too.
- While the growth numbers have surprised to the upside recently, the Core PCE Price Index this coming Friday could be the report that impacts the EUR/USD this week the most.
- Perhaps a range between 1.17300 to 1.17900 may factor into trading early this week for the EUR/USD within its known realm.
- A look at a one month chart may offer this consideration for some traders, particularly those who believe the EUR/USD will not go too much lower, but may find it difficult to gain momentum higher in the short-term.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.17150 to 1.18200
If U.S inflation numbers are stronger than anticipated this could create more headwinds for the EUR/USD. However, leading up to this report on Friday, a lot of talk will be heard about the GDP numbers. Choppy trading in the EUR/USD should be anticipated this week as resistance may prove interesting as a spot for some traders to actually sell the currency pair before U.S economic data is known.
The higher price action achieved in the EUR/USD and general USD centric weakness in Forex was generated on the hope the Fed would say it anticipates lowering the Federal Funds Rate by another 50 to 75 basis points over the mid-term, but that was not made clear. Instead warnings about potential inflation continue to be heard and this may create some pushback against a stronger EUR/USD taking control for the time being. The U.S data this coming week will factor into trading. Financial institutions may prove quite conservative before the growth and inflation reports.
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