The EUR/USD is trading in a narrow range close to 1.0500. Investors are closely watching the Fed’s policy meeting.
Fed’s Expected Actions and Impact
The Fed is widely anticipated to cut interest rates by 25 bps. However, it’s also expected to make somewhat hawkish remarks regarding policy guidance. Analysts at Bank of America expect the rate cut to bring the rate to the 4.25%-4.5% range. The CME FedWatch tool shows the market has fully priced in this 25 bps reduction. With the rate cut announcement expected, investors will focus mainly on Fed Chair Jerome Powell’s press conference for interest rate guidance. Bank of America analysts think Powell might signal a slow rate-cut approach and a possible pause in January if economic data is as expected. The CME FedWatch tool also indicates traders believe the Fed will keep rates unchanged in January.
ECB’s Stance and Its Influence
The Euro is showing mixed movements. While it’s higher across the board on Wednesday, its outlook remains bearish. The European Central Bank (ECB) is expected to move towards the neutral rate of around 2% by the first half of 2025. Traders expect rate cuts at each meeting until June 2025. ECB policymaker Pierre Wunsch said he sees “four more rate cuts” in 2025. Another policymaker, Olli Rehn, said inflation stabilizing near the 2% target sets the stage for further rate cuts, though he didn’t give a specific path.
EUR/USD Price Action and Technical Analysis
Recent Price Movement
The EUR/USD has been trading around 1.0500 for the last five trading days. It faces pressure near the 20-day Exponential Moving Average (EMA) at around 1.0535, suggesting a bearish near-term trend.
Technical Indicators
The 14-day Relative Strength Index (RSI) is around 40.00. If it falls below this level, bearish momentum could increase.
Support and Resistance Levels
Looking down, the two-year low of 1.0330 from November 22 is a key support level. On the upside, the December 6 high of 1.0630 is a major barrier for the Euro bulls.
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