Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.1700.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.2000.
The EUR/USD exchange rate moved sideways after the Federal Reserve started its interest rate cuts on Wednesday. It initially crossed the important resistance level at 1.1900 and then pulled back to 1.1850 as traders reflected on the decision and its implications.
Implications of the Federal Reserve Interest Rate Cut
The EUR/USD exchange wavered as investors reacted to the September Federal Open Market Committee (FOMC) interest rate decision, which was in line with what Wall Street analysts were expecting.
Officials voted for a 0.25% rate cut that brought the benchmark rate between 4.00% and 4.25% as most analysts were expecting. Stephen Miran, who joined the bank this week, voted to cut interest rates by 0.50%.
Most importantly, the committee hinted that it will deliver interest rates two times this year, and analysts expect more to come next year. Some of the rate cuts will come because Donald Trump will replace Jerome Powell in the year's first half.
The bank is specifically worried about the labor market, which has largely stalled in the past few months, with the economy adding just 22,000 jobs in August, and losing thousands in June. A recent report showed that the number of people on payrolls was down by over 911,000 than expected.
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The bank is also concerned about the slowdown of the economy as key industries react to Donald Trump's tariffs. As a result, key sectors like manufacturing, technology, and hospitality are showing some weakness this year.
The EUR/USD exchange rate also reacted to the latest European inflation data, which may impact the European Central Bank interest rates decision. The data revealed the the headline inflation remained unchanged at 2.0%, while the core CPI remained at 2.3%.
These numbers are supportive of further easing as the bloc’s inflation has moved to the 2.0 target.
EUR/USD Technical Analysis
The EUR/USD exchange rate has been in a strong uptrend since July when it bottomed 1.1390 as investors waited for the Federal Reserve rate cut. This rally continued after the cut, reaching a high of 1.1920, its highest level in years.
The pair remains slightly above the important resistance level at 1.1835, the highest level in July. The Awesome Oscillator has moved above the zero line, while the pair is above the Ichimoku cloud.
Therefore, the pair will likely continue rising as bulls target the next key psychological level at 1.2000. However, the pair may move sideways ahead of the push to that target.
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