Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1800.
- Add a stop-loss at 1.1500.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1800.
The EUR/USD exchange rate remained in a narrow range as focus shifted to the upcoming Federal Reserve interest rate decision, scheduled on Wednesday this week. The pair was trading at 1.1645, a few points below last week's high of 1.1680.
Federal Reserve Interest Rate Decision
The main catalyst for the EUR/USD exchange rate this week will be the upcoming Fed decision, in which officials will deliberate on the state of the American economy and deliver their interest rate decision.
Economists polled by Reuters expect the bank's officials to decide to cut interest rates by 0.25%, bringing the benchmark rate to between 3.50% and 3.75%. This will be the third consecutive interest rate cut of the year.
Officials supporting the rate cut point to the labor market, which has shown some strains in the past few months. A report released by ADP showed that November payrolls fell unexpectedly by 32,000, with small businesses bearing most of the blunt. On the positive side, the annual pay was up by 4.4%, higher than the current inflation rate.
In addition to the rate cut, the most important part of the jobs report will be the guidance on what to expect in the coming meetings. Some analysts expect the bank to point to more rate cuts, while others expect a pause, which will help the bank assess the success of its rate cuts policies.
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The other key catalysts for the pair will be the upcoming macro data from the US. For example, the Bureau of Labor Statistics will likely publish the latest inflation data on Thursday, a day after the rate decision. Economists see the report showing that the headline inflation rose from 2.6% in September to 2.7% in October.
EUR/USD Technical Analysis as it Flips Supertrend Indicator Green
The daily timeframe chart shows that the EUR/USD exchange rate pulled back slightly from a high of 1.1680 last week to the current 1.1643. It has remained in this range in the past few days.
On the positive side, it has remained above the 50-day Exponential Moving Average (EMA), a sign that it has more upside to go. It has also flipped the Supertrend indicator green, while the Relative Strength Index (RSI) has continued rising.
Therefore, the most likely scenario is where it continues rising, with the next key resistance level to watch being at 1.1800. A drop below the key support at 1.1500 will invalidate the bullish outlook.
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