EUR/USD: Rich monetary news

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The Euro/Dollar currency pair remained under pressure from the 20-day moving average (in dark blue), the day after a Fed FOMC which unsurprisingly resulted in a 25 basis point drop in the Dollar’s rent. J Powell, however, was cautious, warning markets that a further cut in federal rates was far from automatic. Especially since the Federal Reserve navigates by sight, without its usual benchmarks on employment and prices, due to workforce decimated by the shutdown in federal administrations.

Paul Jackson, Global Head of Asset Allocation Research at Invesco, believes “the decisions made at this meeting significantly change the direction of the Fed’s key rates over the coming year.”

“We continue to expect a series of rate cuts that could return the upper range of policy rates to 3.00%-3.25% by the December 2026 FOMC meeting. We believe the exact timing of rate cuts is less important than the overall direction taken. A rate cut in December 2025 remains possible, but easing at three consecutive meetings would perhaps be more radical than we believe the rate warrants. economic outlook. That said, the federal government shutdown deprives us of important data, which alone could justify another preemptive rate cut this year.”

In particular, the September private employment report (NFP) has still not been published.

For its part, the ECB concludes a meeting of its Board of Governors this Thursday. A status quo on the “rent” of the Euro is widely anticipated by currency traders, who will not fail to pay attention to Christine Lagarde’s comments on the two main economic powers of the Euro Zone:

“Germany is still suffering its industrial crisis and in particular its poor strategic choices in the automobile sector. France is suffering from an endless political crisis which penalizes the morale of economic agents and which slows down growth”, notes Emmanuel Auboyneau, associate manager at Amplegest, who continues:

“The Central Bank has recently shown a reluctance that it had abandoned until its last rate cut. Christine Lagarde undoubtedly believes that the work has largely been done with all the rate cuts for more than a year and that we must now wait to see their diffusion in the economy. She should, however, keep the door open to additional action in the coming months, especially since the American Federal Reserve seems to be heading for a cycle of rate cuts.”

To follow at 2:15 p.m. the decision on the rates themselves, and the monetary policy decision, then at 2:45 p.m. the ECB press conference.

It should be noted on the macroeconomic level that political instability in France will at this stage have had no impact on growth (+0.5% in Q3), according to very early estimates.

At midday on the foreign exchange market, the Euro was trading against $1.1605 approximately.

KEY GRAPHIC ELEMENTS

The bullish oblique that prevailed until now (in black on the chart) is now broken, with pullback confirmation. The negative view is offered under this oblique, while the relative strength index collapses. The 20-day moving average (in dark blue) has just broken the trajectory of its 50-day counterpart (in orange) at a significant angle. The gap between these two technical benchmarks is increasing.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.1606 USD. The price target for our bearish scenario is at 1.1013 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1761 USD.

The expected profitability of this Forex strategy is 593 pips and the risk of loss is 155 pips.

DAILY DATA CHART