EUR/USD holds ground amid firm focus on Fed policy

RoboForex Analysis Department RoboForex

The EUR/USD pair retreated to 1.1612 on Tuesday, pulling back from a recent two-week high. The catalyst for the move was a significant repricing of US interest rate expectations following weak manufacturing data. The ISM Manufacturing Index confirmed a ninth consecutive month of contraction, with the pace of decline the fastest in four months.

This data solidified market expectations for a Federal Reserve rate cut. Futures markets now imply an 88% probability of a 25-basis-point reduction at next week's FOMC meeting.

In related news, President Donald Trump announced he has selected a candidate for the next Fed Chair. Media reports suggest the leading contender is Kevin Hassett, the current head of the White House National Economic Council.

Investor attention is now focused on an upcoming speech by current Chair Jerome Powell later today, which may offer further clues on the Fed's policy trajectory.

Technical analysis: EUR/USD

Four-hour chart

On the H4 chart, EUR/USD continues to trade within an established ascending channel. The pair is currently testing a key resistance zone at 1.1655, where buying momentum has met significant selling pressure. A decisive breakout above this level would open the path towards the next major resistance at 1.1730.

The Stochastic Oscillator is rising from the middle zone, indicating sustained bullish momentum without overbought conditions. The MACD remains above its zero line, maintaining a stable, albeit weak, buy signal. Conversely, a break and close below the key support at 1.1545 would signal a deeper correction, likely targeting the lower boundary of the current range near 1.1468.

One-hour chart

On the H1 chart, the pair is undergoing a correction after being rejected from local resistance at 1.1652. Buyers are currently defending the price above the middle Bollinger Band, suggesting short-term bullish control remains intact.

The Stochastic Oscillator is in overbought territory (above 80) and is turning down, pointing to a near-term corrective pullback. However, the MACD remains in positive territory, supporting the broader upward bias. This technical picture suggests a brief downward pause is likely, with a potential retest of support in the 1.1600–1.1585 zone. A successful hold above this area would increase the probability of a fresh upward impulse, targeting a renewed test of 1.1652 and an eventual push towards 1.1700.

Conclusion

EUR/USD remains confidently bid, supported by growing expectations of Fed easing. While a short-term technical correction is underway, the broader structure on both the H4 and H1 charts remains constructive. The key for continued upside is a successful defence of the 1.1600–1.1585 support zone. A break above 1.1655 would be a significant bullish confirmation, while a failure to hold support could trigger a deeper pullback towards 1.1545.

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RoboForex Analysis Department

RoboForex

RoboForex Analysis Department provides timely market insights, expert technical analysis, and actionable forecasts across forex, commodities, indices, and equities.

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