- While traders are waiting for the FOMC’s upcoming decision, the euro remains stable, and core PCE figures align with expectations.
- There’s still some uncertainty about the magnitude of future rate cuts, and although there’s some support around 1.14, stronger economic data from the U.S. could lead to a stronger dollar.
The euro experienced a slight uptick during Friday trading, but overall, it feels somewhat stagnant. With the Federal Open Market Committee’s interest rate decision set for Wednesday, I think we’re entering a sort of holding pattern. The core PCE price index that came out on Friday recorded a 0.2% increase, right on target with what analysts were forecasting. So, at least the Fed can breathe a little easier, knowing it wasn’t higher.
As a result, it seems traders are still banking on a rate cut. The real eye-opener will be the press conference following the rate decision and the guidance Jerome Powell provides. Observing the current trend, it looks like things are leveling off. This trend has been noticeable since July 15, and apart from a dip after the September FOMC meeting, it hasn’t shown dramatic changes, suggesting that market confidence in a substantial rate cut cycle has waned. This could mean more room for the U.S. dollar to gain strength.
Potential for USD Strength
There are numerous indicators—some unique ones—that indicate the U.S. economy might be considerably stronger than many other global markets at the start of 2026. Because of this, we could see the U.S. dollar gaining traction, particularly against the euro. We’ll just have to wait and see how it plays out. However, the 200-day EMA at 1.14 and below offers some support. Even if there’s a breakout, as long as it stays under 1.18, not much will change for now.
With over 20 years of experience in the financial markets, Christopher Lewis specializes in foreign exchange. He’s contributed to various publications, including FX Empire and Investing.com, sharing insights on trading stock indices, commodities, and forex. Chris tends to favor a longer-term trading approach, with some trades lasting several days or even weeks.
