EUR/USD Forecast: US Dollar under persistent pressure ahead of FOMC Minutes

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0943

Market participants hope FOMC meeting Minutes will shed light on future monetary policies.
European Central Bank President Christine Lagarde will speak in Frankfurt, Germany.
EUR/USD positive momentum eases, sellers nowhere to be found.

Financial markets maintain an optimistic tone, resulting in EUR/USD moving closer to the 1.1000 psychological threshold. Wall Street posted substantial gains on Monday, with stocks’ gains extending early Asia. Markets became more cautious after London’s opening as investors await the Federal Open Market Committee (FOMC) meeting Minutes. The document will shed clarity on what prompted policymakers to refrain from hiking rates for a second consecutive meeting. Ahead of the release, market players are increasing bets on a potential rate cut in May 2024.

Meanwhile, a successful United States (US) 20-year Treasury auction on Monday weighed on the US Dollar while lifting equities. The highest yield accepted by investors was 4.78%, below the when-issued yield of 4.79%, reflecting solid demand. Speculative interest bets US interest rates will fall next year amid the Federal Reserve´s (Fed) latest decisions hinting at the end of the tightening cycle.

The macroeconomic calendar will remain scarce throughout the first half of the day, with no relevant figures from the Euro Zone. The US will publish the October Chicago Fed National Activity Index ahead of the opening and the aforementioned FOMC Minutes in the American afternoon.

Additionally, the European Central Bank (ECB) President Christine Lagarde is due to speak at an event hosted by the German Ministry of Finance in Frankfurt, Germany. The latest from Lagarde on monetary policy is that she dismissed the odds for rate cuts throughout the first half of 2024. Early on Tuesday, ECB’s Governor Council member Gediminas Simkus said market expectations on ECB rate cuts are “too optimistic,” aligning with Lagarde on cooling investors’ enthusiasm over a policy shift.

EUR/USD short-term technical outlook

The EUR/USD pair seesaws around the 61.8% Fibonacci retracement 1.1275/1.0447 decline at 1.0959. It peaked a few pips above the level for the day, but EUR/USD can still not clear the static resistance area.

From a technical perspective, the daily chart indicates that EUR/USD is overbought but still bullish. Technical indicators aim north with uneven strength, standing at fresh multi-week highs. At the same time, the pair develops well above directionless 100 and 200 Simple Moving Averages (SMAs), standing around the 1.0800 level, while the 20 SMA keeps firming north below the longer ones.

In the near term, and according to the 4-hour chart, EUR/USD offers a neutral-to-bullish stance. Technical indicators have lost their bullish strength but consolidate well into positive territory, with the Relative Strength Index (RSI) indicator developing within overbought levels. Finally, the EUR/USD pair develops far above bullish moving averages, with the 20 SMA maintaining a firmly upward slope far above the longer ones. Once the pair clears the immediate Fibonacci resistance, a test of the 1.1000 mark is on the cards.

Support levels: 1.0925 1.0890 1.0840

Resistance levels: 1.0960 1.1005 1.1045

View Live Chart for EUR/USD

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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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