Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1480.
- Add a stop-loss at 1.1700.
- Timeline: 1-2 days.
Bearish view
- Buy the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.1480.
The EUR/USD exchange rate pulled back to its lowest level in over a week after the Federal Reserve delivered its second interest rate cut of the year to combat the slowing economy. It dropped to 1.1595, down from the year-to-date high of 1.1915.
Federal Reserve and ECB Interest Rate Decisions
The EUR/USD pair retreated after the Federal Reserve delivered its second interest rate cut of the year. It slashed rates by 0.25%, bringing the benchmark rate to between 3.75% and 4%, its lowest level since 2022.
Most notably, officials signaled that it will end its quantitative tightening policy in December. The three-year QT program has seen it reduce its balance sheet by $2 trillion. It will continue the runoff of its portfolio of its mortgage-backed securities by about $35 billion a month.
The Fed slashed interest rates as the government shutdown continues and the US publishes weak macroeconomic data. A report released earlier this month by ADP showed that the private sector lost 36,000 jobs in September.
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At the same time, inflation has been contained, with the headline Consumer Price Index (CPI) rising to 3.0% in September, lower than the median estimate of 3.1%. Core inflation dropped all slightly to 3.0%.
With the Federal Reserve decision done, the next key EUR/USD news will be the upcoming European Central Bank (ECB) interest rate decision. Economists expect the bank to leave interest rates unchanged now that it has largely achieved its 2% inflation target
Most ECB officials have signaled that they were comfortable with interest rates remaining at the current level for a while.
The other major catalyst for the EUR/USD pair will be the first estimate of the European Union's third-quarter GDP data. While this is important data, chances are that it will not have a major impact on the pair.
EUR/USD Technical Analysis
The EUR/USD exchange rate has come under pressure in the past few weeks, moving from a high of 1.1922 in September to the current 1.1595.
It has moved below the 50-day Exponential Moving Average (EMA) and the Ichimoku cloud indicator.
The pair has moved to the lower side of the symmetrical triangle pattern, while the Relative Strength Index (RSI) has pointed downwards below the neutral point at 50.
Therefore, the most likely scenario is where the pair continues falling ahead of the upcoming ECB interest rate decision. Such a move will point to more downside, potentially to the key support at 1.1485.
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