Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0250.
- Add a stop-loss at 1.0550.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0550.
- Add a stop-loss at 1.0250.
The EUR/USD pair retreated for two straight days after the Federal Reserve published a hawkish statement in its first meeting of the year. It dropped to a low of 1.0400, down from this week’s high of 1.0530.
Fed and ECB interest rate decisions
The EUR/USD pair retreated dropped after the Federal Reserve delivered its first interest rates decision. As was widely expected, the bank left interest unchanged between 4.25% and 4.50% in a unanimous decision.
The main change in its statement was that the bank removed reference to inflation making progress, a sign that it expects the headline figure to remain above its 2% target for a while.
It also noted that the unemployment rate had stabilized, a sign that the labor market remained solid. Therefore, analysts anticipate that the Fed will maintain interest rates unchanged for a while as it waits for more clarity on inflation and the labor market.
With the Fed done, focus now shifts to the upcoming European data and ECB interest rate decision. Eurostat will publish the first estimate of fourth-quarter GDP data ahead of the decision.
Economists expect the data to show that the economy expanded by 0.1% in Q4 after growing by 0.4% in Q3. This quarterly growth will coincide with an annual figure of 1.0%, higher than Q3’s 0.9%. The Eurostat will also publish the latest industrial sentiment and unemployment rate numbers.
Most economists expect the ECB will deliver a cautious rate cut of 0.25% and signal that it will pause for a while. The bank is likely contented with recent economic numbers showing that the European economy was stabilizing.
The other key economic numbers to watch on Thursday will be the first estimate of US GDP data on Thursday. Economists expect that the economy expanded by 2.7% after expanding by 3.1% in the previous quarter.
EUR/USD technical analysis
The EUR/USD exchange rate retreated to a low of 1.0400, down from this week’s high of 1.0533. It has dropped below the key support level at 1.0450, its lowest point in October 2023. The pair has moved below the 50-day moving average, while the Relative Strength Index (RSI) has tilted downwards.
The EUR/USD pair has moved to the weak, stop & reverse point of the Murrey Math Lines tool. Therefore, it will likely continue falling as sellers target the ultimate support at 1.02500.
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