EUR/USD may draw bids on rising Fed rate cut odds


  • Rising odds of an October Fed rate cut could continue to bode well for the EUR/USD pair. 
  • The pair may rise to 1.10 if the US ADP data prints below estimates. 

EUR/USD on Tuesday eked out a 0.32% gain and could remain better bid Wednesday, courtesy of the heightened US recession fears and the resulting rise in the odds of an October Federal Reserve (Fed) rate cut. 

The US Institute of Supply Management's closely-watched manufacturing index dropped to 47.8 in September, its lowest level since June 2009. The gauge contracted for the second consecutive month and confirmed that the ongoing trade tiff with China is hurting the US economy. 

Tuesday’s data has bolstered the US recession fears, forcing markets to price in a higher probability of the Fed cutting interest rates in October. 

As of now, the market sees a 64% chance of the Fed reducing rates by 25 basis points in October versus 40% seen before the ISM’s release. 

The rate cut odds may rise further, sending the US Dollar lower if the US ADP Employment change, due at 12:15 GMT, prints below estimates. In that case, EUR/USD will likely rise to 1.10, as suggested by the pennant breakout on technical charts. 

The bullish technical setup would fail if the US data beats estimates by a big margin, forcing markets to scale back Fed rate cut expectations. 

As of writing, EUR/USD is trading largely unchanged on the day at 1.0937. 

Technical levels

EUR/USD

Overview
Today last price 1.0937
Today Daily Change 0.0003
Today Daily Change % 0.03
Today daily open 1.0934
 
Trends
Daily SMA20 1.1008
Daily SMA50 1.1072
Daily SMA100 1.1158
Daily SMA200 1.1238
 
Levels
Previous Daily High 1.0943
Previous Daily Low 1.0879
Previous Weekly High 1.1026
Previous Weekly Low 1.0905
Previous Monthly High 1.111
Previous Monthly Low 1.0885
Daily Fibonacci 38.2% 1.0919
Daily Fibonacci 61.8% 1.0904
Daily Pivot Point S1 1.0895
Daily Pivot Point S2 1.0855
Daily Pivot Point S3 1.0831
Daily Pivot Point R1 1.0958
Daily Pivot Point R2 1.0983
Daily Pivot Point R3 1.1022

 

 

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