Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1450.
- Add a stop-loss at 1.1650.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1650.
- Add a stop-loss at 1.1450.
The EUR/USD exchange rate rose to an important resistance level as the US Dollar Index softened after hopes that the US government shutdown was ending. It was trading at 1.1578, up from last week's low of 1.1477.
Christine Lagarde Speech Ahead
The EUR/USD exchange rate rose slightly after a group of senators reached a deal to reopen the government after the six-week shutdown.
This deal will now need to go to the House of Representatives, where it is expected to pass narrowly. Polymarket traders are betting that the shutdown will end later this week.
The end of the shutdown now removes one of the main risks that has existed in the market in the past few weeks. It also means the Federal Reserve will not deliver its interest rate decision blindly as the Bureau of Labor Statistics will likely start to publish key macro data later this month.
The EUR/USD pair also rose after the odds of interest rate cuts by the Federal Reserve rose. For example, the CME Fed Fund Futures tool places the odds of more cuts to 70%. Similarly, traders on prediction markets like Polymarket and Kalshi are also betting on the next Fed cut.
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Some Federal Reserve officials have also hinted their support of rate cuts. In a statement on Monday, Mary Daly said that she will support another cut in December, warning that prolonged high interest rates will lead to more weakness in the labor market.
The next key catalyst for the EUR/USD exchange rate will be the upcoming statement by Christine Lagarde, the head of the European Central Bank (ECB). Her statement will provide more color on what to expect in the coming meetings, with most traders anticipating a pause.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair has rebounded in the past few days, moving from a low of 1.1470 last week to a high of 1.1533.
This rebound, however, is not strong enough as the Average Directional Index (ADX) has retreated to 18 and is pointing downwards.
The pair has remained below the 50-day and 100-day Exponential Moving Averages (EMA). It also remains below the Supertrend indicator, a sign that bears are in control.
Therefore, the pair will likely continue falling as sellers target the next key support level at 1.1400. A move above the resistance level at 1.1665 will invalidate the bearish outlook.
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