EUR/USD Outlook: Fed Rate Cut Pressure Mounts, Dovish Hopes Fade
During the early European session, the EUR/USD pair continued to decline, hovering around 1.1740. The move comes as the US Dollar (USD)...
Quick overview
- The EUR/USD pair is declining around 1.1740 due to a strengthening US Dollar following a recent Fed rate cut.
- The ECB has kept rates unchanged and is taking a cautious, data-driven approach amid a slow economic outlook.
- Market participants are awaiting Eurozone Consumer Confidence data and comments from Fed officials for further direction.
- Technical analysis shows the EUR/USD is testing key support levels, with potential upside resistance at 1.1800 and 1.1815.
During the early European session, the EUR/USD pair continued to decline, hovering around 1.1740. The move comes as the US Dollar (USD) strengthened after last week’s Fed rate cut and the ECB decided to keep rates unchanged amid a cautious economic outlook. Market participants will be watching the Eurozone Consumer Confidence and Fedspeak later today for direction.
On the US side, the recent rate cut was expected but Fed Chair Jerome Powell called it a “risk management cut” to support the labor market while inflation is still high. His comments showed the Fed is not as dovish as some had hoped and that’s giving strength to the US Dollar and putting pressure on the EUR/USD.
Fed officials including Powell will be speaking later this week and traders will be listening for clues on the US economy and the Fed’s independence. Any renewed concerns on the central bank’s autonomy could limit further dollar gains and keep markets cautious short term.
ECB Leaves Rates Unchanged
On the European side, the ECB kept its three key rates unchanged at its September meeting and is adopting a data-driven, meeting-by-meeting approach. Vice President Luis de Guindos said the central bank may not be done with the cuts that started in June 2024. Governing Council member Martins Kazaks added that inflation below 2% is tolerated, so it’s a slow and deliberate approach rather than a hasty one. This cautious stance combined with dollar strength is the reason for the fourth consecutive day of declines for the EUR/USD.
EUR/USD Technical Forecast
The EUR/USD 2-hour chart is testing the trendline from early September, just above the 200-EMA at 1.1700. This confluence of trendline and long-term moving average is a strong area where buyers tend to regroup.
Candlestick pattern adds weight to this support zone. The bounce from 1.1720 left a long lower wick, a rejection of lower prices. Not a perfect hammer but it shows demand is present at trendline support. The RSI which bounced from oversold levels near 35 suggests bearish momentum is easing but a confirmed bullish divergence has not yet appeared.Upside resistance at 50-EMA around 1.1800 and horizontal resistance at 1.1815. A break above these could open up 1.1880, the recent high. Downside risk if 1.1700 fails and 1.1660 and 1.1615—previous consolidation areas.
Trade: For beginners, the trendline is the key. Long at 1.1730-1.1740 with stop below 1.1700 is tight risk. Profit targets at 1.1800 and 1.1880 line up with EMA and resistance. But watch for bearish engulfing candles below 1.1700; that would flip the outlook bearish and favor further downside.
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