EUR/USD Price Forecast: Fiber resumes decline after testing Bearish Flag breakdown

EUR/USD falls back from the intraday high of 1.1418 as the US Dollar rebounds.
The Fed is expected to leave interest rates unchanged.
ECB officials warn that inflation could remain above the 2% target for a longer period.

Sagar Dua FXStreet

The Euro (EUR) gives back a majority of its early gains against the US Dollar (USD) after failing to rise above the intraday high of 1.1418 on Monday. During European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades almost 0.2% higher to near 1.1395.

The major currency pair surrenders early gains as the US Dollar (USD) bounces back after a weak start of the week. The US Dollar started lower as the pause in military aggression between the United States (US) and Iran over the weekend diminished the appeal of safe-haven assets.

This week, major triggers for the pair will be the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, and the release of the Eurozone Harmonized Index of Consumer Prices (HICP) data for July on Friday.

Investors expect the Fed to leave interest rates unchanged in the range of 3.50%-3.75% again and deliver no monetary policy guidance, while warning of upside inflation risks.

On the Eurozone front, the inflation data will influence the European Central Bank‘s (ECB) interest rate expectations, as officials have expressed concerns regarding prolonged elevated inflationary pressures.

EUR/USD technical analysis

EUR/USD trades higher at around 1.1392, but is keeping a mildly bearish near-term tone as the 20-day Exponential Moving Average (EMA) at around 1.1419 continues to act as a key barrier. The pair has also faced rejection near the breakdown region of the 20-day EMA, which is around 1.1420.

The Relative Strength Index (RSI) around 43 suggests subdued bearish momentum rather than outright oversold conditions.

On the topside, initial resistance is located at the former channel floor turned barrier near 1.1420, with the upper channel boundary around 1.1550 acting as the next key cap if buyers regain traction. On the downside, immediate support is the prior trendline reaction levels around 1.1381, with a deeper slide exposing structural support near 1.1312.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY declines toward 157.00 as Yen gathers strength after BoJ

The Japanese Yen gathers strength on Friday, with USD/JPY falling toward 157.00 in the second half of the day. The Bank of Japan (BoJ) decided to leave monetary policy settings unchanged at the October meeting, as expected. In the post-meeting press conference, BoJ Governor Ueda reiterated that they will continue to raise the policy rate and adjust the degree of monetary easing in reponse to economic activity and prices.

Gold slips below $4,000 despite risk-off mood as hawkish Fed expectations weigh

Gold (XAU/USD) remains under pressure on Friday, slipping to $3,965 during Asian trading hours, its lowest level since July. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory. At the time of writing, XAU/USD trades around $3,979, down nearly 1% on the day.

The hawkish Fed can't lift the US Dollar anymore

About three more Federal Reserve hikes are already priced in, and the central banks behind the Euro, Pound, Yen and Loonie are raising rates or about to. That leaves the US Dollar Index with little to gain if the Fed keeps leaning toward higher rates.

Binance hack shakes crypto, but XRP pullback may not be so bearish

Crypto markets were hit by a big headline overnight. Binance confirmed a security incident in which a compromised engineer's laptop led to unauthorized withdrawals, with an estimated impact of around $6.3 billion. About $3 billion has been frozen so far, Binance says it will cover the losses, and withdrawals were paused while security checks are completed.

A hot US economy is supposed to sink Gold. It didn't. Here's why

Gold (XAU/USD) remains under pressure near $4,000, as stronger-than-expected United States (US) economic data reinforce expectations of another Federal Reserve (Fed) interest rate hike in December. Economic growth is accelerating, inflation remains elevated, and borrowing costs could rise further.