EUR/USD Forecast: Spooked by the highs and the doves after the Fed-fueled rally

• EUR/USD has risen in response to the Fed decision.
• The currency pair's gains may have reached their limits amid dovish comments and weak data.
• Thursday's four-hour chart is pointing to near overbought conditions.

The dark side has been more appealing for the Federal Reserve on the evening of Halloween – in a "trick or treat" meeting. 

The world's most powerful central bank cut interest rates for the third time in a row, as expected. It then sent the dollar higher by signaling a pause via a change of its guidance, saying that monetary policy is appropriate. Moreover, the Fed seemed content about the labor market and consumption, while unworried about inflation. 

Jerome Powell, Chair of the Federal Reserve, kicked off the meeting by saying that monetary policy is in a good place and that only a "material reassessment" would be needed to trigger another rate cut.

Yet after setting a high bar for cutting rates, he set an even higher bar for raising them. Powell said that the Fed would hike only if inflation rises. Prices would first need to pick up speed before the Fed moves, while a change to the outlook is enough for a cut.

That triggered a sell-off of the US Dollar which has extended into the European session.

Europe has its own troubles

The old continent is not faring much better. Luis de Guindos, Vice President of the European Central Bank, has said that monetary policy has yet to reach its limits. Moreover, he added that the manufacturing slump is already hurting the labor market – probably referring to Wednesday's disappointing employment data – the economy shed 6,000 net jobs in September. Moreover, the euro area's Unemployment Rate disappointed with an increase from 7.4% to 7.5%.

Other euro-zone data has been unimpressive. The Consumer Price Index slowed down from 0.8% to 0.7% – the slowest since 2016. On the other hand, Core CPI surprised by 1.1%. Both figures are from the ECB's 2% target. 

Gross Domestic Product beat expectations with 0.2% quarterly, but that has been insufficient to stop the annual deceleration to 1.1%. 

The bloc's figures could have been worse – but they are far from being satisfactory.

US data flow

In the US, the economy grew by 1.9% annualized, only a marginal slowdown. The consumer continues carrying the economy on its back (see analysis). ADP's private-sector jobs report showed an increase of 125,000, within expectations and maintaining expectations for Friday's Non-Farm Payrolls.

See US Non-Farm Payrolls Preview: The trend remains the same.

Today's US calendar features the Core Personal Consumption Expenditure (Core PCE), which is the inflation measure that the Fed targets. It is likely to drop to 1.7%. Personal Income and Personal Spending are also of interest. 

Apart from economic indicators and central banks, US-Sino trade talks continue seeing contradictory reports. On one hand, talks are advancing and top officials are set to speak on the phone on Friday. On the other hand, China is reportedly refusing to budge on structural issues and sees a deal with President Donald Trump as unfeasible. The topic has been on the backburner, but may return to the spotlight. 

End-of-month flows are set to trigger choppy trading toward the end of the day.

All in all, data, reactions to central bankers, and trade developments are set to move EUR/USD today.

EUR/USD Technical Analysis

The Relative Strength Index on the four-hour chart is flirting with the 70 level – indicating overbought conditions. That may trigger a correction. EUR/USD continues enjoying upside momentum and has broken above the 50 Simple Moving Average – bullish signs.

Resistance awaits at 1.1180, which is October's high point and strong resistance. Next, we find 1.1230, which was a peak in August. It is followed by 1.1250, which dates back to June, and then by 1.1390 and 1.1410.

The currency pair has support at 1.1140, which worked was a swing high in mid-October, followed by 1.1105, that provided support later this month. Next, we find 1.1070, a double bottom from recent days. The former quadruple top of 1.10 is next.