EUR/USD Climbs Above 1.1100 Ahead of Fed Policy Decision
- EUR/USD maintains gains above 1.1100 as anticipation builds for the Fed’s policy announcement at 18:00 GMT.
- Market sentiment indicates a growing belief that the Fed will implement a 50 basis points interest rate cut.
- ECB’s Villeroy suggests the easing cycle will continue.
In the European session on Wednesday, EUR/USD remains steady above the 1.1100 level as the US Dollar faces pressure leading up to the Federal Reserve’s upcoming monetary policy decision. The pair strengthens as expectations rise for the Fed’s first interest rate reduction in over four years.
The US Dollar Index (DXY) struggles to maintain its recovery near 101.00, with recent positive US monthly Retail Sales data in August providing some support.
Market participants display increased confidence in the Fed’s aggressive stance on interest rate cuts, citing concerns over job growth slowdown and decreasing inflation towards the 2% target.
According to the CME FedWatch tool, there is a 65% probability of a 50-bps rate cut to 4.75%-5.00%, with the remaining favoring a 25-bps reduction.
ECB’s Diverging Views Influence Euro’s Performance
- The Euro lags against major peers as ECB officials express differing opinions on interest rate policies and economic performance.
- ECB member Villeroy suggests more rate cuts are necessary to prevent low inflation levels.
- Contrarily, ECB member Kazimir advocates waiting for more clarity before deciding on the next move.
- Expectations point to another rate cut by the ECB in either October or December.
Technical Analysis: EUR/USD Chart Patterns
EUR/USD remains above 1.1100, supported by a Rising Channel breakout near 1.1000. The pair’s outlook strengthens as it holds above the 20-day EMA around 1.1060.
RSI nearing 60.00 indicates potential bullish momentum if sustained.
Resistance levels at 1.1155 and 1.1200, while support lies at 1.1000 and 1.0950.
Euro FAQs: Understanding the Euro and Its Impact
- The Euro is the currency for 20 European Union countries in the Eurozone, second only to the US Dollar in global trading volume.
- The European Central Bank (ECB) in Frankfurt manages the Eurozone’s monetary policy, influencing the Euro’s value through interest rate decisions.
- Eurozone inflation data, economic indicators, and trade balances all play a role in shaping the Euro’s performance.