- The Dec. 4 high of 1.1116 is the level to beat for the EUR bulls.
- The Federal Reserve (Fed) is expected to keep rates unchanged.
- Markets have priced in the rate cut pause.
- Dollar to take a beating if the Fed cites higher inflation as a prerequisite for a rate hike.
EUR/USD is currently lacking a clear directional bias and needs to break above the Dec. 4 high of 1.1116 to confirm a short-term bullish trend.
The spot has established a higher low at 1.1094 and a close above 1.1116 would confirm a higher high.
Fed to keep rates unchanged
The Federal Reserve is widely expected to keep interest rates steady at 1.5-1.75%, officially bringing an end to the 75bp mid-cycle adjustment.
Analysts at TD Securities expect the committee to communicate patience in deciding future policy moves and President Powell to reiterate that a "material reassessment" in the outlook is a precondition to ease further.
The market has already priced in the rate cut pause. The focus, therefore, is on the interest rate dot plot.
Analysts at Goldman Sachs believe there could be a hawkish or dovish surprise. A hawkish surprise would be more committee members forecasting a single rate hike in 2020 or two rate hikes in 2022.
In that case, EUR/USD will likely drop below 1.1040, invalidating the bullish higher low.
Meanwhile, a dovish surprise would be a decline in the median long-run dot from September's level of 2.5% and/or participants citing higher inflation as a prerequisite for the next rate hike.
A dovish outcome will likely fuel a convincing break above 1.1116. The Fed rate decision is due at 19:00 GMT.
The pair may also take cues from the US Consumer Price Index (Nov) scheduled for release at 13:30 GMT. The European data docket is empty.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.