Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1478.
- Add a stop-loss at 1.1550.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1550.
- Add a stop-loss at 1.1478.
The EUR/USD exchange rate held steady last week as market participants focused on the odds of Federal Reserve interest rate cuts in the coming meeting. It was trading at 1.1622, down from the year-to-date high of 1.1915.
Federal Reserve Interest Rate Cut Odds Fall
The EUR/USD exchange rate has rebounded in the past few days as investors focused on some key statements from Federal Reserve officials. In multiple statements, Fed officials like Jeff Schmid of Kansas and Susan Collins of Boston, argued that the bank should not rush to cut rates soon.
These officials argue that the country’s inflation has remained at an elevated level in the past four years. As such, they expect that more cuts by the Fed will push inflation higher over time.
The Fed officials also maintained that the labor market was still resilient, with the unemployment rate remaining at 4.2%. Still, there are signs that the labor market is deteriorating, with companies like Target, UPS, and Amazon cutting thousands of jobs.
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These statements have led to a retreat in the odds that the Fed will cut rates in the coming meeting. Data on Polymarket and Kalshi shows that these odds have dropped to 54% from the year-to-date high of over 90%.
The next key catalyst for the EUR/USD pair will be statements from Christopher Waller and Neel Kashkari. Waller, who is eying the Fed Chair post, has emerged as a key supporter of rate cuts. Kashkari has somewhat maintained a dovish view in the past few weeks.
The EUR/USD pair will also react to the upcoming statements by some key European Central Bank officials. Philip Lane, Cipollone, and Michael de Guindos will talk today. Also, the bank will publish its autumn forecast.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has held steady in the past few days. It rose from a low of 1.1478 last week to the current 1.1622 as Fed cut hopes fell.
The pair has remained above the 525-day Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) has moved above the neutral point at 50 and is pointing upwards.
However, there are signs that the uptrend is losing momentum as the Average Directional Index (ADX) has retreated. Therefore, there is a risk that it will resume the downtrend and retest the support at 1.1478.
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