EUR/USD hovers at seven-week low amid adjusted Fed rate expectations

As of Tuesday, EUR/USD remains near a seven-week low, with the pair currently hovering around the 1.0984 mark as it attempts to stabilise. Market focus is intensely on the Federal Reserve's interest rate trajectory following last week's robust employment report, which prompted investors to recalibrate their expectations for future rate cuts.

Initially, the market anticipated more aggressive easing, predicting rate cuts totalling 70 basis points by year-end. However, following the strong job data, expectations have shifted to a more conservative outlook. A 25-basis-point cut is anticipated in November with an 85% probability and another in December, totalling 50 basis points for the remainder of the year.

This shift has kept the US dollar firmly in the spotlight, bolstering its position as the Federal Reserve appears poised to ease monetary policy gradually, without abrupt shifts. This measured approach provides considerable support to USD enthusiasts.

Attention today will also be on the US trade balance data. Although this release is not expected to stir market activity significantly, investors are likely to conserve their energy for the upcoming release of the minutes from the last Fed meeting, due tomorrow, which could offer deeper insights into the central bank's policy direction.

EUR/USD technical analysis

The EUR/USD has recently completed a downward wave to 1.0950 and is consolidating above this level. The consolidation is expected to extend upwards to 1.1000, which could be seen as a corrective move against the previous downward trend. Upon reaching 1.1000, a subsequent decline to 1.0915 might ensue. This bearish scenario is supported by the MACD indicator, with its signal line positioned below zero and trending downwards, suggesting further declines.

On the hourly chart, EUR/USD is forming a consolidation around 1.0977, with an anticipated breakout upwards. The growth wave structure nearing completion at 1.0995 could soon lead to a brief decline back to 1.0977, followed by another push towards 1.1000. This move is seen as a correction, with the potential for a subsequent decline back to 1.0915. The Stochastic oscillator supports this view, with its signal line currently above 80 but poised to drop towards 20, indicating the potential for a reversal after the correction.