Uncertainty remains with buyers still in control

EUR/USD Current Price: 1.1127

• Financial markets are struggling for direction following the Fed’s aggressive rate cut.
• Better-than-expected US data provided fresh impetus for the US dollar.
• EUR/USD is coming off intraday highs, but a steeper decline is out of the picture for now.

EUR/USD resumed its advance after dropping to 1.1067 during Asian trading hours and traded as high as 1.1178 as optimism kept the US dollar under selling pressure in the first half of the day. Financial markets continue to grapple with the Federal Reserve’s (Fed) latest monetary policy decision, as the central bank announced a 50 basis point (bps) interest rate cut on Wednesday, the first in four years. The USD edged lower on the headline, but pared losses afterwards, only to decline again on the new day.

Overall, the Fed maintained a cautious approach to future interest rate moves, refraining from anticipating a cycle of aggressive rate cuts. To the contrary, Chairman Jerome Powell reiterated that officials will remain dependent on the data. But it is clearly the beginning of a new cycle. The Summary of Economic Projections (SEP) showed that additional tariffs are coming this year and next. And why the document is not a guarantee, it reflects their intentions, that is to return to a more neutral rate”. Stock markets have certainly welcomed the news as global indices are on board with the news, leading to strong gains among US futures.

Meanwhile, the USD gathered modest momentum ahead of the Wall Street open following the release of US data. The country released its Q2 Current Account, which posted a deficit of $266.8 billion, slightly worse than expected. At the same time, initial jobless claims for the week ended September 13 improved to 219,000, while the Philadelphia Fed Manufacturing Survey was printed at 1.7 in September, much better than the previous -7 or the expected -1. Positive government sentiment should limit USD gains in the next US session.

EUR/USD short-term technical outlook

Technically, EUR/USD is hovering around 1.1130, maintaining its positive bias. The daily chart shows that uncertainty remains as, for the second day in a row, the pair traded in an extended range but failed to find its way. The technical indicators on the said chart suggest that the risk for EUR/USD is declining to the upside as they remain in positive levels and with uneven upside. Also, a fixed 20 simple moving average (SMA) at around 1.1090 provides support, with buyers quickly emerging on dips below it.

In the short term, EUR/USD is losing its upside but is far from bearish. Technical indicators have turned south but are holding above the median lines. At the same time, a bullish 20 SMA continues to advance beyond the 100 and 200 SMAs, with the longer one also gaining upward traction. The pair needs to break above 1.1050 to actually become bearish, an unlikely scenario at the moment.

Support levels: 1.1090 1.1050 1.1010

Resistance levels: 1.1160 1.1200 1.1250