Clear strategies.
- Buy the EUR/USD pair and set a take profit at 1.1850.
- Implement a stop loss at 1.1650.
- Timeframe: 1-2 days.
Alternative strategies.
- Sell the EUR/USD pair, setting a take profit at 1.1650.
- Maintain a stop loss at 1.1850.
The EUR/USD rates held steady on Thursday morning as traders awaited updates on the ongoing US government shutdown. The trading rate was around 1.1730, falling just short of its peak for the week.
Impact of the US Government Shutdown on the Federal Reserve
As the US government shutdown stretched into its second day, EUR/USD rates experienced some instability. White House representatives indicated that layoffs in various government sectors would commence soon.
Historically, government shutdowns often lead to job losses. This looming threat has been a burden for Democrats who are advocating for funding to support healthcare initiatives within their budgets.
Job losses have further strained a labor market that’s already facing challenges. An ADP report highlighted a decline of over 36,000 jobs in September.
This suggests that the Federal Reserve might consider lowering interest rates at their upcoming October meeting, potentially marking the second cut in a row, reducing rates from 3.75% to 4%.
Conversely, the European Central Bank (ECB) appears set to keep interest rates unchanged for the near future, as inflation hovers around the 2% target.
A recent report indicated a slight uptick in the consumer price index, rising from 2% to 2.2%, while the core CPI remained constant at 2.3%. Officials are optimistic that inflation will stabilize near their target in the coming months.
The main factor influencing the EUR/USD pair is the upcoming speech by Luis de Guindos, vice president of the ECB. Recently, he stated that the bank is likely to maintain steady rates in their next meeting.
EUR/USD Technical Insights
An analysis of the daily chart shows the EUR/USD pair peaked at 1.1915 in September before dropping to a low of 1.1657 on September 26.
This movement broke through an ascending trend line that has been in place since last May, suggesting substantial support at this level.
The pair is also above the 50-day and 100-day Exponential Moving Averages (EMA). Thus, the outlook remains bullish as long as it stays above the trend line. If it falls below, there could be significant downside potential.
Crispus Nyaga is a financial analyst with over eight years of experience in the industry. He has collaborated with various firms, including ATFX, Easymarkets, and Octafx. In his leisure time, he enjoys watching golf and spending time with his family.
