EUR/USD Forecast: Fed brings 1.10 back on the radar, but the ECB is next
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UPGRADE- Fed holds rates, hints at rate cuts in 2024.
- ECB to keep rates steady, no surprises expected.
- The EUR/USD jumped rising above the 20-DMA.
The EUR/USD pair rallied over 100 pips following the Federal Reserve meeting, to the 1.0900 aera. Despite the magnitude of the move, the momentum remains firmly bullish, supported by the US Dollar's decline.
As expected, the Federal Reserve kept interest rates unchanged during the meeting. In their projections, policymakers anticipate multiple rate cuts in 2024. This outlook from the FOMC staff prompted a rally in US bonds, with the 10-year yield dropping to 4%, its lowest level since August. Simultaneously, the US Dollar Index also lost nearly 1%, approaching the 102.50 area.
The European Central Bank (ECB) will announce its decision on Thursday. Interest rates are expected to remain on hold for the second consecutive meeting. There will likely be discussions regarding PEPP reinvestment and the Minimum Reserve Requirement, but no decisions are expected at this time. ECB President Christine Lagarde will deliver a press conference, and updated staff macroeconomic projections will be released. A downgrade in inflation and growth forecasts is anticipated. If no surprises emerge from the meeting, the impact on the market could be limited.
The focus is now set on what the ECB will do next year. Markets seem dovish, with a rate cut already priced in for the April meeting. This expectation has been weighing on the Euro, and Thursday's meeting will likely provide further insight for future repositioning.
In the US, after the Fed meeting, the focus will be back on the data. The weekly Jobless Claims and Retail Sales reports are due on Thursday.
The US Dollar has resumed its decline after the FOMC, supporting a potential rally back to 1.1000. However, the ECB could halt the rally on Thursday, or the Eurozone PMIs on Friday.
EUR/USD short-term technical outlook
Boosted by a sharp decline in the US Dollar, the EUR/USD pair broke above the 1.0820 level and rose towards the 1.0900 area. There is a decent resistance zone around that area that could potentially limit further upside. However, a bullish breakout above that mark could trigger more gains, with the next resistance seen at 1.0930. Technical indicators on the daily chart have turned bullish, and as long as the pair remains above 1.0870, which is the 20-day Simple Moving Average (SMA), further gains appear likely.
On the 4-hour chart, the Relative Strength Index (RSI) is in overbought territory, but the Moving Average Convergence Divergence (MACD) and Momentum indicators suggest that the upward move could extend. In case of a correction, support is expected around 1.0850. Only a decline below 1.0780, which includes the uptrend line and the 20-SMA, would change the short-term outlook to negative.
- Fed holds rates, hints at rate cuts in 2024.
- ECB to keep rates steady, no surprises expected.
- The EUR/USD jumped rising above the 20-DMA.
The EUR/USD pair rallied over 100 pips following the Federal Reserve meeting, to the 1.0900 aera. Despite the magnitude of the move, the momentum remains firmly bullish, supported by the US Dollar's decline.
As expected, the Federal Reserve kept interest rates unchanged during the meeting. In their projections, policymakers anticipate multiple rate cuts in 2024. This outlook from the FOMC staff prompted a rally in US bonds, with the 10-year yield dropping to 4%, its lowest level since August. Simultaneously, the US Dollar Index also lost nearly 1%, approaching the 102.50 area.
The European Central Bank (ECB) will announce its decision on Thursday. Interest rates are expected to remain on hold for the second consecutive meeting. There will likely be discussions regarding PEPP reinvestment and the Minimum Reserve Requirement, but no decisions are expected at this time. ECB President Christine Lagarde will deliver a press conference, and updated staff macroeconomic projections will be released. A downgrade in inflation and growth forecasts is anticipated. If no surprises emerge from the meeting, the impact on the market could be limited.
The focus is now set on what the ECB will do next year. Markets seem dovish, with a rate cut already priced in for the April meeting. This expectation has been weighing on the Euro, and Thursday's meeting will likely provide further insight for future repositioning.
In the US, after the Fed meeting, the focus will be back on the data. The weekly Jobless Claims and Retail Sales reports are due on Thursday.
The US Dollar has resumed its decline after the FOMC, supporting a potential rally back to 1.1000. However, the ECB could halt the rally on Thursday, or the Eurozone PMIs on Friday.
EUR/USD short-term technical outlook
Boosted by a sharp decline in the US Dollar, the EUR/USD pair broke above the 1.0820 level and rose towards the 1.0900 area. There is a decent resistance zone around that area that could potentially limit further upside. However, a bullish breakout above that mark could trigger more gains, with the next resistance seen at 1.0930. Technical indicators on the daily chart have turned bullish, and as long as the pair remains above 1.0870, which is the 20-day Simple Moving Average (SMA), further gains appear likely.
On the 4-hour chart, the Relative Strength Index (RSI) is in overbought territory, but the Moving Average Convergence Divergence (MACD) and Momentum indicators suggest that the upward move could extend. In case of a correction, support is expected around 1.0850. Only a decline below 1.0780, which includes the uptrend line and the 20-SMA, would change the short-term outlook to negative.
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