EUR/USD Regains Ground as Market Awaits Fed Decision...

EUR/USD Regains Ground as Market Awaits Fed Decision


The Euro (EUR) has rebounded against the US Dollar (USD), allowing EUR/USD to recover and make gains near the 1.0700 level on Wednesday. Meanwhile, the USD Index (DXY) has been trading with uncertainty in the low 105.00s as market participants exercise caution ahead of the crucial Federal Open Market Committee (FOMC) gathering in the North American session. In this article, we delve into the factors influencing the EUR/USD exchange rate and the market's anticipation of the Fed's interest rate decision.

Euro Finds its Footing

After a brief pullback on Tuesday, the Euro has regained its composure against the US Dollar. EUR/USD is showing signs of strength as it approaches the 1.0700 barrier, reflecting renewed confidence among Euro traders.

Uncertain Greenback

In contrast, the US Dollar has been trading inconclusively, with the DXY hovering in the low 105.00s. This indecision in the USD market can be attributed to the cautious sentiment prevailing ahead of the highly anticipated FOMC meeting.

Fed's Interest Rate Outlook

Market participants are closely watching the Fed's interest rate decision, with widespread expectations that the central bank will maintain its current interest rates. This anticipation comes amid increasing speculation of potential rate cuts in the second quarter of 2024. The Fed's stance on interest rates is of paramount importance, as it shapes market sentiment and influences currency movements.

European Economic Indicators

In the European economic calendar, New Car Registrations in the European Union (EU) experienced robust growth of 21.0% year-on-year in August, indicating some positive momentum in the auto sector. Additionally, Producer Prices in Germany rose by 0.3% month-on-month in August, although they contracted by 12.6% compared to the same month the previous year. These economic indicators provide insights into the region's economic health.

Upcoming US Data

In the US, the Mortgage Bankers Association (MBA) is set to release its regular weekly report on Mortgage Applications, offering a glimpse into the housing market's performance. Furthermore, the Energy Information Administration (EIA) will publish its weekly report on US crude oil supplies, which can impact the energy market and, by extension, the USD.

Bearish Forecast with Potential Rebound

Despite the recent gains in EUR/USD, the overall forecast remains bearish, with the possibility of a rebound in the area between the 50% and 61.8% Fibonacci levels, potentially leading to a new bearish impulse in the currency pair.

Conclusion

EUR/USD has rebounded, reclaiming some lost ground as it approaches the 1.0700 level. The USD, represented by the DXY, remains uncertain as market participants exercise caution ahead of the FOMC meeting. Expectations of the Fed maintaining interest rates while rate cut speculation looms on the horizon contribute to the prevailing market dynamics. Additionally, economic indicators from Europe and upcoming US data releases continue to influence currency movements. Traders will closely monitor the Fed's decision and its impact on the EUR/USD exchange rate in the days to come.

Our preference

Short positions below 1.0735 with targets at 1.0655 & 1.06250 in extension.

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