The EUR/USD pair is trading positively around 1.1220 in the early hours of Monday in Europe. The US Dollar (USD) is weakening against the Euro (EUR) as US Treasury bond yields experience a decline following a prolonged increase. This week, the US Federal Reserve (Fed) and the European Central Bank (ECB) are likely to be in the spotlight due to their upcoming interest rate decisions.
In the previous session, the yield on the 10-year US Treasury fell to 4.97%, while the 30-year bond yield was at 5.299%, nearing one-month lows. Ray Attrill, the head of FX strategy at National Australia Bank, commented that “for the time being, it seems to point to the US bond market being in the driving seat for broader dollar performance.”
Analysts widely expect the Fed to maintain current interest rates just ahead of the midterm elections. The markets are indicating about a 90.6% chance that the Fed will not change rates during its meeting on Wednesday, with a 79.4% likelihood of a rate hike happening in December.
On the flip side, there are worries regarding increased unrest in France and the nation’s deteriorating budgetary issues, which could exert pressure on the Euro in the short term.
Traders are looking ahead to the ECB’s interest rate decision on Thursday, with no changes anticipated. They’ll be attentive for any indicators regarding future rate trends after ECB President Christine Lagarde indicated a balanced response to inflation in late September.
Warsh discusses investment trends and AI focus without committing to Fed direction
Fed Chair Warsh’s recent speech received a 5.6/10 on the FXS Speechtracker, slightly below the historical average of 6.1/10, reflecting a careful tone despite positive comments about structural growth and a surge in investment. His statement regarding being “over-scarred from the global financial crisis” shows a persistent caution towards risk management and financial stability, although he emphasizes the strength of policy-driven investments and avoids making predictions about the October and December meetings. His focus on AI’s demand impact and the upcoming November field hearing indicates a forward-thinking approach, yet the absence of clear guidance keeps the overall message measured rather than clearly hawkish.
The FXS Fed Sentiment Index remained unchanged at 127.51, suggesting that the speech did not significantly alter perceptions of policy direction. The index is still above 100, indicating that the Fed remains in hawkish territory, and the stable reading implies that Warsh’s remarks mostly reinforced the existing policy narrative noted in the FXS Speechtracker.
Technical Analysis: EUR/USD shows bearish trend below the 100-day SMA
According to the daily chart, EUR/USD maintains a bearish near-term outlook while trading below the 100-day simple moving average (SMA) and under the upper Bollinger band. Prices are testing the middle band of the Bollinger, acting as immediate resistance, while the 14-day Relative Strength Index sits around 40, which indicates weak, still-bearish momentum rather than being outright oversold.
On the upside, resistance is initially at the October 16 high of 1.1270, approaching the Bollinger band’s upper boundary at 1.1315. Continuing to trade above this point could lead toward the 100-day SMA at 1.1450, which would require a breakout to alleviate the broader bearish pressure.
On the downside, the low from October 23 at 1.1185 is the first support level, followed by the lower Bollinger band around 1.1138. A clear move under this support would pave the way to the psychological barrier of 1.1100.
