Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1750.
- Add a stop-loss at 1.1550.
- Timeline; 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1550.
- Add a stop-loss at 1.1750.
The EUR/USD exchange rate remained in a tight range on Wednesday as market participants waited for upcoming Federal Reserve and European Central Bank (ECB) interest rate decisions and key economic numbers. It was trading at 1.1662, its highest level since October 17.
Federal Reserve and European Central Bank decisions
The EUR/USD pair rose slightly as more signs that the Federal Reserve will slash interest rates in the coming meeting emerged.
A report released by the Conference Board showed the country’s consumer confidence declined for three consecutive months as the outlook for the economy and labor market remained.
US consumer confidence dropped by one point to 94.6, its worst performance since April this year. Another data showed the six-month expectations fell for six consecutive months.
Confidence has remained under pressure in the past few months as the labor market remains. For example, UPS has a large laid of 34,000 workers this year and is on track to fire 14,000 more. Amazon also plans to fire thousands of workers, while the government shutdown continues.
Therefore, these numbers mean that the Federal Reserve will cut interest rates by 0.25% in this meeting, bridging the benchmark rate to between 3.75% and 4%. It will also end the quantitative tightening that has seen it reduce the balance sheet substantially.
The EUR/USD exchange rate will also react to the upcoming European Central Bank interest rate decision and the first estimate of European third-quarter GDP data. Unlike the Fed, the ECB is not expected to cut interest rates this time.
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The other major macro news to watch will be Donald Trump’s meeting with Xi Jinping at the APEC Summit in South Korea, where they will deliberate on trade and other issues. This meeting comes as negotiators of the two sides reached an outlook of a deal.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has remained in a tight range in the past few days. It was trading at 1.1655, inside a range it has been since the month started.
The pair is stuck at the 50-day Exponential Moving Average. It has also formed a symmetrical triangle pattern whose two lines are about to converge.
The two lines of the Percentage Price Oscillator (PPO) have formed a bullish crossover pattern. Therefore, the most likely scenario is where the EUR/USD pair has a bullish breakout, potentially to 1.1750.
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