EUR/USD Forecast: Sharp reversal after Fed leaves the Euro vulnerable
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UPGRADE- The Fed keeps rates on hold and suggests that further tightening may be appropriate.
- The US Dollar soars after the FOMC meeting, while stocks tumble and Treasury yields jump.
- The EUR/USD once again points to the 1.0600 area.
The EUR/USD declined sharply from weekly highs above 1.0730, falling to 1.0650 following the FOMC meeting, driven by a stronger US Dollar. The market continues to digest the outcome and Powell’s comments.
As widely expected, the Federal Reserve kept its interest rate target range unchanged at 5.25-5.50% in a unanimous decision. The statement showed practically no changes compared to the July meeting.
The Summary of Economic Projections indicates that most members believe another rate hike before year-end is likely. Fed Chair Powell mentioned that the dot plot "is not a plan." For next year, the forecast shows reduced expectations of rate cuts.
The outcome of the meeting was seen as hawkish. US bond yields jumped, reaching multi-year highs, and Wall Street turned to the downside. This combination boosted the US Dollar across the board. US data will now take center stage as the Fed keeps the door open to further tightening. On Thursday, Jobless Claims, the Philly Fed, and Existing Home Sales are due. On Friday, Eurozone and US preliminary PMI data will be crucial.
Eurostat will release preliminary Consumer Confidence data on Thursday. Also relevant for the Euro will be decisions from the Swiss National Bank and the Bank of England.
EUR/USD short-term technical outlook
The EUR/USD remains in a downward channel with a clear bearish bias. It reversed after approaching the 20-day Simple Moving Average (SMA) at 1.0755. A break above 1.0780 would indicate a more sustainable recovery for the Euro.
The pair was rejected from above 1.0700 and broke below 1.0675, shifting the short-term outlook to bearish. Technical indicators in the four-hour chart favor the downside, with the Relative Strength Index (RSI) and Momentum turning south. If the current slide keeps the pair below 1.0670, further losses seem likely, particularly under 1.0650.
Below 1.0650, the next strong support is around the recent low in the 1.0630 area. A break lower would target 1.0600. At 1.0590, the pair could see a rebound. A recovery above 1.0685 would alleviate the bearish pressure.
- The Fed keeps rates on hold and suggests that further tightening may be appropriate.
- The US Dollar soars after the FOMC meeting, while stocks tumble and Treasury yields jump.
- The EUR/USD once again points to the 1.0600 area.
The EUR/USD declined sharply from weekly highs above 1.0730, falling to 1.0650 following the FOMC meeting, driven by a stronger US Dollar. The market continues to digest the outcome and Powell’s comments.
As widely expected, the Federal Reserve kept its interest rate target range unchanged at 5.25-5.50% in a unanimous decision. The statement showed practically no changes compared to the July meeting.
The Summary of Economic Projections indicates that most members believe another rate hike before year-end is likely. Fed Chair Powell mentioned that the dot plot "is not a plan." For next year, the forecast shows reduced expectations of rate cuts.
The outcome of the meeting was seen as hawkish. US bond yields jumped, reaching multi-year highs, and Wall Street turned to the downside. This combination boosted the US Dollar across the board. US data will now take center stage as the Fed keeps the door open to further tightening. On Thursday, Jobless Claims, the Philly Fed, and Existing Home Sales are due. On Friday, Eurozone and US preliminary PMI data will be crucial.
Eurostat will release preliminary Consumer Confidence data on Thursday. Also relevant for the Euro will be decisions from the Swiss National Bank and the Bank of England.
EUR/USD short-term technical outlook
The EUR/USD remains in a downward channel with a clear bearish bias. It reversed after approaching the 20-day Simple Moving Average (SMA) at 1.0755. A break above 1.0780 would indicate a more sustainable recovery for the Euro.
The pair was rejected from above 1.0700 and broke below 1.0675, shifting the short-term outlook to bearish. Technical indicators in the four-hour chart favor the downside, with the Relative Strength Index (RSI) and Momentum turning south. If the current slide keeps the pair below 1.0670, further losses seem likely, particularly under 1.0650.
Below 1.0650, the next strong support is around the recent low in the 1.0630 area. A break lower would target 1.0600. At 1.0590, the pair could see a rebound. A recovery above 1.0685 would alleviate the bearish pressure.
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