Bearish View
Sell the EUR/USD and set a take-profit at 1.1500.
Add a stop-loss at 1.1650.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.1600 and a take-profit at 1.1700.
Add a stop-loss at 1.1500.
The EUR/USD pair was little changed as investors refocused on the upcoming Fed decision and the US employment numbers. The pair is trading at 1.1587, where it has been in the past two days.
Fed Interest Rate Decision
The EUR/USD has been relatively calm since Monday as investors focus on the Fed meeting that started on Tuesday. The decision is expected to come out later today.
It comes at a time when the US economy is sending mixed signals. For example, data published in October showed that the American economy declined to 2% in the third quarter after rallying by 5.7% in the second quarter. This decline happened as the economy continued struggling with the supply chain challenges.
Additional data have shown that the economy has added fewer jobs than expected in the past two straight months. At the same time, the unemployment rate has declined to about 4.8% while wages have continued their bullish trend.
Inflation has also held steady above the bank’s target of 2.0%. Data published on Friday showed that the personal consumption expenditure (PCE) rose to 4.4% in September. This was the highest it has been since 1991. At the same time, the headline CPI has risen to about 5.4% while core CPI has risen to 4.0%.
Therefore, analysts expect that the Federal Reserve will sound a bit hawkish during this meeting. Precisely, they expect that the bank will signal that it will point to a rate hike coming in the third or fourth quarter of 2022. At the same time, the bank will likely start to taper its asset purchase program by about $15 billion.
In addition to the Fed decision, the EUR/USD will react to the latest ADP jobs data. Economists expect the data will show that the private sector added about 400k jobs in October after it added more than 568k jobs in the previous month.
EUR/USD Forecast
The two-hour chart shows that the EUR/USD pair’s rally that was started on Monday hit a barrier on Tuesday as investors waited for the upcoming Fed decision. The pair is trading at 1.1587, which was its lowest level between October 26th and October 28th. It has also moved to the middle line of the Bollinger Bands while the MACD is hovering near the neutral level. Therefore, the pair will likely resume the bearish trend and retest last Friday’s low of 1.1535.
