- We highlight the Euro’s struggle to hold gains ahead of the upcoming FOMC meeting, noting technical resistance near the 50-day EMA and a broader trading range.
- The analysis leans mildly bearish, citing U.S. strength and European stagnation.
- The Euro initially tried to rally during the trading session on Tuesday, just as it did on Monday.
- We started to give back gains pretty quickly.
We are hanging around the 50-day EMA, so there's a certain amount of technical analysis to be looked at here. And there is a little bit of a pseudo downtrend line that we're following. But what I think we are really seeing here is the fact that the market doesn't really know what to do with the FOMC meeting next Wednesday.
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The euro has lost ground against the US dollar since the September meeting, where it peaked against the dollar. And then Jerome Powell said something that the market didn't expect. He said that they weren't necessarily on an automatic trajectory to cut rates. Since then, we've seen the euro shrink, but at this point, I think we're trying to form some type of range to trade from. The bigger range would be between the 1.14 level at the bottom and the 1.18 level at the top. We are basically at the 1.16 level, meaning we're at assumed fair value. I still think this is a market that probably has more downward pressure than up, but we'll just have to wait and see.
Range Structure and Outlook
I do like the idea of fading rallies, but this pair is notoriously choppy anyway. Clean moves probably don't happen often, but sometime next week we'll probably get a clean move after that FOMC meeting and perhaps more importantly, the press conference. If we break down below the 1.14 level, it opens up a move down to 1.11.
I would not be surprised at all to see that, as the U.S. economy is on track to heat up a little bit in the early part of 2026, while Europe is expected to stagnate a bit. All things being equal, I am negative in this pair, but mildly so. I don't think momentum is quite yet. Topping is a bit of a process. I think we're still in the middle of it.
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