Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1625.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1625.
- Add a stop-loss at 1.1400.
The EUR/USD exchange rate retreated for three consecutive days and moved below a crucial support level after the latest European Central Bank (ECB) and Federal Reserve interest rate decisions. It dropped to a low of 1.1535, down from the year-to-date high of 1.1918.
Federal Reserve and ECB Decisions
The EUR/USD exchange rate remained under pressure after the diverging Federal Reserve and European Central Bank (ECB) interest rate decisions.
The Federal Reserve delivered its consecutive interest rate cut on Wednesday as most analysts were expecting. Officials also noted that they would end the two-year quantitative tightening process.
The EUR/USD dropped because the decision was more hawkish than expected as officials remained concerned about inflation. As a result, Jerome Powell noted that the bank will not commit to cutting the interest rate in the last meeting of the year.
The pair also slipped after the European Central Bank delivered a mild interest rate decision. Like the Fed, the bank did as analysts were expecting by leaving interest rates unchanged.
It believes that the economy is in a good place with inflation and economic growth being balanced. This decision came as a recent report showed that the bloc’s inflation rose to 2.2% in September from the previous 2%.
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The ECB decision came after a report showed that the bloc’s economy expanded by 0.2% in Q3 from the previous quarter, a sign that the bloc is doing well.
Looking ahead, the EUR/USD pair will react to the upcoming European and US manufacturing PMI numbers, which will provide more color about the economic performance in October.
The pair will also react to the upcoming private payrolls data by ADP, which will come out on Wednesday. This will be a key report now that the Bureau of Labor Statistics (BLS) will not publish the latest jobs numbers on Friday because of the government shutdown.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair remained on edge after the latest Fed and ECB decisions. It dropped to a low of 1.1535, its lowest level since August 1.
The pair has also moved below the lower side of the symmetrical triangle pattern. It also dropped below the 50-day moving average, while the Relative Strength Index has pointed downwards.
Therefore, the pair will likely continue falling as sellers target the next key support at 1.1400, its lowest point on August 1.
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