Fundamental Overview
The USD weakened across the board on the Fed’s decision but eventually erased all the losses and increased the gains as traders digested all the information and realised the projected rate path was more hawkish than market’s pricing.
In fact, the dot plot showed that the FOMC projected two more rate cuts for 2025 by a narrow majority, with the rest of officials expecting just one more or even none. Moreover, the Fed projected just one cut in 2026 compared to three that the market was pricing before the decision.
Fed Chair Powell then labelled the rate cut as a “risk management” action given the weakening in the labour market data. But overall, he sounded pretty neutral even though he understandably placed more emphasis on the labour market given the two consecutive soft NFP reports.
The day after the FOMC decision, we got solid US jobless claims report, and the greenback increased the gains further. Looking forward, it’s going to be all about the data. Strong data will likely trigger a hawkish repricing in interest rates expectations and support the greenback. On the other hand, weak data will likely continue to weigh on it.
On the EUR side, the ECB left interest rates unchanged at the last meeting as widely expected with limited forward guidance other than the usual data-dependent approach. President Lagarde made it pretty clear that the central bank finished cutting rates after she said that growth risks are balanced and the disinflationary process was over. The market sees just 4 bps of easing by year-end and 11 bps in total by the end of 2026.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD probed above the 2025 high but eventually erased all the gains as the US dollar strengthened across the board following the Fed’s decision. The price is bouncing from the upward trendline that is defining the bullish momentum. The buyers will likely continue to lean on the trendline to keep pushing into new highs, while the sellers will look for a break lower to target the 1.16 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action although there’s not much else we can add here. The buyers will look for dip-buying opportunities around the trendline, while the sellers will wait for a breakout to target a drop into the 1.16 support.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around the 1.1790 level. If the price gets there, we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the trendline targeting a breakout. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we have the Eurozone and the US Flash PMIs, as well as Fed Chair Powell speaking. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PCE report. Keep also an eye on Fed speakers this week.
