Fundamental Overview
On Wednesday, the Fed finally started its easing cycle and decided to do it with a 50 bps cut. The market was already leaning towards a 50 bps move, so it wasn’t a surprise.
The larger cut was framed as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a boost despite the rise in Treasury yields. Now that the decision is behind us, the focus will be on the economic data.
If we start to see an improvement, then Treasury yields will likely continue to rise and lead to a reprising in the dovish expectations supporting the greenback in the short-term.
Conversely, if the data weakens, the market will likely go ahead with expecting more 50 bps cuts by year-end and weighing on the US Dollar.
On the EUR side, the ECB speakers seem to prefer a rate cut in December while the market is pricing a 68% chance of a cut in October nonetheless. The central bank is data-dependent, so that's what will drive their decisions.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is back around the 1.12 handle after some choppy price action following the Fed’s decision. From a risk management perspective, the buyers would have a much better risk to reward setup around the trendline, although a break of the high will likely see the bullish momentum increasing. The sellers, on the other hand, will likely step in around these levels to position for a drop into the trendline.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a consolidation right around the 1.1155 level. This might act as kind of a barometer with the price staying above being more bullish and staying below being more bearish.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add as the price action has been very choppy and fundamentally there’s also a good chance to see some strengthening in the USD if the data starts to improve. The red lines define the average daily range for today.