Bearish view
- Sell the EUR/USD exchange rate and set a take-profit at 1.1395.
- Add a stop-loss at 1.1725.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1725.
- Add a stop-loss at 1.1395.
The EUR/USD exchange rate moved sideways as traders predicted what to expect from the Federal Reserve and European Central Bank (ECB) in the final meetings of the year. It was trading at 1.1635, inside a range it has been in the past few days.
Federal Reserve and ECB Cues
The EUR/USD exchange rate wavered as investors predicted that the Federal Reserve would slash interest rates in the final two meetings of the year as concerns about the economy remains.
Odds of a rate cut rose after Jerome Powell's statement on Tuesday. In it, the Fed Chair hinted that the bank will cut rates and either pause or end the ongoing quantitative tightening process, which has dramatically reduced the size of the bank’s balance sheet.
The next important catalyst for the EUR/USD pair will be statements from some Fed officials like Stephen Moran, Christopher Waller, Michele Bowman, Thomas Barkin, and Michael Barr.
Most of these officials have maintained a dovish tone, pointing to the deteriorating labor market, which is shedding more jobs than it is creating.
In a statement on Wednesday, Russell Vought, the OMB director, noted that the administration has fired 4,000 jobs during the government shutdown and that officials were expecting over 10,000 layoffs.
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The EUR/USD exchange rate will also react to the upcoming macro data, including the Philadelphia Fed Manufacturing Index, which will provide more information about the industry. Analysts expect the figure to show that the index dropped from 23.2 in September to 10 in October.
The EUR/USD exchange rate will react to statements by European Central Bank’s Christine Lagarde and Philip Lane, the chief economist. Their statements will provide more information about the upcoming meeting, in which officials anticipate leaving rates unchanged.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has pulled back in the past few days as the US dollar index jumped. This pullback has pushed it below the 50-day Exponential Moving Average (EMA).
It has also formed a double-top pattern who upper side is at 1.1830 and the neckline is at 1.1395. The pair is also forming a small bearish flag pattern, which is a popular bearish continuation sign.
Therefore, the most likely scenario is where it plunges and hits the neckline at 1.1395. This view will be confirmed if it drops below the 23.60% Fibonacci Retracement level at 1.1500.
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