Bearish Outlook
- Consider selling the EUR/USD pair with a profit target set at 1.1400.
- Include a stop loss at 1.1625.
- Timeframe: 1-2 days.
Bullish Outlook
- Think about buying the EUR/USD pair, aiming for a take profit at 1.1625.
- Add a stop loss at 1.1400.
After the recent interest rate decisions from the European Central Bank (ECB) and the Federal Reserve, the EUR/USD exchange rate has declined for three consecutive days, dipping below a significant support level. It has dropped from a year-to-date high of 1.1918 to a low of 1.1535.
Federal Reserve and ECB Decisions
The exchange rate is facing ongoing pressure due to differences in interest rate strategies between the Federal Reserve and the ECB.
The Fed, as many analysts anticipated, reduced interest rates during their Wednesday meeting and announced the end of a two-year quantitative tightening initiative.
The decline in the EUR/USD pair followed concerns about inflation, with Fed officials adopting a stance that was, perhaps unexpectedly, more hawkish. Chairman Jerome Powell mentioned that the bank wouldn’t guarantee further rate cuts at its final meeting of the year.
Additionally, the ECB’s recent decision to maintain interest rates—similar to the Fed—contributed to the drop in the currency pair.
We feel the economy is generally stable, with inflation and growth appearing balanced. This decision coincided with reports showing regional inflation rose to 2.2% in September, up from 2% previously.
The ECB’s decision came after a report indicated a 0.2% growth in the region’s economy in the third quarter compared to the previous one.
Moving forward, the EUR/USD pair is expected to react to upcoming manufacturing PMI data from Europe and the U.S., along with insights from October’s economic performance.
Both parties will also be observing private payroll figures from ADP that will be released on Wednesday. This report holds significance, especially since the Bureau of Labor Statistics will postpone its employment numbers release due to the government shutdown.
EUR/USD Technical Analysis
The daily chart indicates that the EUR/USD pair remains volatile following the recent decisions from the Fed and ECB. It dropped to 1.1535, marking the lowest point since August 1st.
Furthermore, the pair has fallen to the lower side of a symmetrical triangle pattern. The 50-day moving average is also showing a downward trend, with the relative strength index reflecting a similar decline.
As a result, it seems the pair may continue to decline as sellers aim for the next critical support level, which is the August 1st low at 1.1400.
Chrispus Nyaga has over eight years of experience as a financial analyst, coach, and trader, having worked with leading companies like ATFX, easyMarkets, and OctaFx. He has contributed articles to platforms such as SeekingAlpha and Investing Cube. In his free time, he enjoys watching golf and spending time with his family.
