EUR/USD analysis: US rate cut yes or no?

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1204

The US Federal Reserve may drop its 'patient' stance and pave the way toward a rate cut.
EUR among the weakest after Draghi's dovish shift from Tuesday.

The EUR/USD pair spent the first half of the day trading uneventfully just below the 1.1200 level, as speculative interest is on-hold ahead of the US Federal Reserve's decision on monetary policy, to be out in the upcoming US session. The American currency is marginally lower daily basis and ahead of the event, but there weren't any significant moves. Equities were up in Asia, although European indexes hover around their opening levels, amid prevalent caution, while government bond yields also hold steady around their Tuesday's closes. In the data front, the EU released April Construction Output, which declined 0.81% MoM but advanced 3.9% YoY. In the US, MBA mortgage applications fell by -3.4% in the week ended June 14, vs. +26.8% prior.

The US Federal Reserve is coming next. The central bank is expected to maintain its monetary policy on hold, yet at the same time, to pave the way toward a rate cut. However, policymakers can also choose to remain 'patient' and wait for more data before taking such a decision. Any variation in the wording of the statement and/or n in the dot-plot will be closely scrutinized.

The EUR/USD pair trades around the 61.8% retracement of its latest bullish run, holding on to the negative tone seen on previous updates, as, in the 4 hours chart, the pair is developing below all of its moving averages, and with the 20 SMA about to cross below the 200 SMA, having already broken below the 100 SMA. The Momentum indicator in the mentioned chart lacks directional strength right below its midline, while the RSI recovers slowly from oversold readings, currently at 42. Should the Fed decide to extend its 'patient' stance, the pair would likely fall to fresh weekly lows, getting closer to the multi-year low of 1.1106.

Support levels: 1.1180 1.1150 1.1105

Resistance levels: 1.1245 1.1280 1.1325

View Live chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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