Euro Stays Steady Against US Dollar Ahead of Central Bank Meetings
The euro (EUR) held its ground against the US dollar (USD) on Monday, as market participants awaited crucial central bank decisions from the US Federal Reserve (Fed) and the European Central Bank (ECB) later this week.
As things stood, the EUR/USD pair was trading around 1.1639 during US trading hours. Meanwhile, the US Dollar Index (DXY), which gauges the dollar’s performance against six major currencies, was experiencing mild pressure, sitting near 98.88.
Traders are seemingly taking a cautious approach while anticipating policy announcements from both sides of the Atlantic. The Fed’s FOMC meeting kicks off on Tuesday and there’s a strong consensus in the market that it will likely cut rates by another 25 basis points (bps) this week. This follows earlier measures taken in September aimed at “risk management.” The speculation for further easing gained traction after last week’s US inflation data came in lower than expected.
Currently, traders peg the probability of a quarter-point rate cut at the Oct. 29-30 meeting at an impressive 96.7%. This reaction from the Fed comes in light of weaker inflation figures and signs of a cooling labor market, despite ongoing price pressures that are still above the Fed’s 2% target, according to the CME FedWatch tool.
On the other hand, the ECB is generally expected to maintain its interest rates at 2.00% for the third consecutive meeting, as policymakers assess recent improvements in business activity and the stabilization of inflation in the euro zone. With inflation largely stable around the ECB’s 2% target, the central bank is anticipated to keep rates steady during Thursday’s meeting.
Looking from a technical standpoint, the price action remains relatively tepid ahead of these important Fed and ECB interest rate decisions. The EUR/USD pair is moving within a descending channel, with the 21-day, 50-day, and 100-day simple moving averages (SMAs) converging between 1.1650 and 1.1690, forming a key resistance zone. Notably, the pair is currently trading below these major moving averages.
On the support side, levels around 1.1600 and 1.1550 appear to be critical. The Relative Strength Index (RSI) hovers around 47, suggesting limited upward momentum right now. For a shift in the short-term bias towards bullish sentiment, a sustained move above the 50-day SMA near 1.1690 would likely be necessary.
