Home EUR/USD Outlook: Investors Worry About the Fed’s Rate Policy

EUR/USD Outlook: Investors Worry About the Fed’s Rate Policy

  • The Fed is expected to increase rates by half a point on December 14.
  • The dollar fell overnight due to uncertainty about the inflation outlook.
  • Democrats increased their fragile Senate majority.

Today’s EUR/USD outlook is bullish. On Thursday, the US dollar remained sluggish after falling against key rivals overnight for the first time this week as investors worried about the possibility of an American recession.

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The recent positive US employment, services, and industrial data have increased investor anxiety regarding the policy’s future. This is despite expectations that the Fed will soon moderate its tightening pace.

The Federal Open Market Committee, which sets policy, is anticipated to raise rates by half a point on December 14 with just a 9% possibility of a 75 basis point hike, according to the money markets. Current predictions have May’s rate peak at just around 5%.

According to Commonwealth Bank of Australia strategist Carol Kong, US rates and the dollar fell overnight due to uncertainty about the inflation outlook.

“There is a significant chance that the FOMC will maintain policy at a level of restriction for some time and, in turn, push the economy into a deeper downturn,” she wrote.

On the political front, the Democrats increased their fragile senate majority after incumbent Raphael Warnock narrowly defeated Donald Trump-backed retired football star Herschel Walker in Georgia.

Unless the Republicans succeed in getting their turn together and have a robust red wave, the Fed’s actions will continue to be the key driver of the dollar’s price movement, according to Edward Moya, a senior market analyst at OANDA.

EUR/USD key events today

Investors will be keen on ECB president Christine Lagarde’s speech and the initial jobless claims report from the US.

EUR/USD technical outlook: Stiff resistance around 1.0550

EUR/USD outlook

The 4-hour chart shows the price struggling to pick a side at the 30-SMA and the RSI slightly above 50. There is indecision at the SMA, but bulls are slightly stronger, as seen in the RSI.

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The price made a strong bullish move after breaking above the 30-SMA but found strong resistance at 1.0550. This level is lower than the previous high, which could mean the start of a downtrend.

If bears break below the trendline and 1.0450 support, the price will fall to 1.0350. The bullish trend can only continue if the price breaks above 1.0550.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.