Nov 02 2022
VOT Research Desk
On Wednesday, EUR/USD entered a consolidation phase below 0.9900 as investors await the Federal Reserve’s policy announcements before wagering on the pair’s future path.
On Tuesday, US statistics indicated that JOLTS Job Openings increased to 10.7 million on the last business day of September, exceeding the market forecast of 10 million.
Coupled with a slightly better-than-expected ISM Manufacturing PMI report for October, the dollar held its ground in the second half of the day on Tuesday, forcing the EUR/USD to give up its daily gains.
Following its two-day policy meeting, the Federal Reserve is expected to raise its policy rate by 75 basis points (bps) to a range of 3.75%-4%.
Investors, on the other hand, want to know whether the Fed will choose for a rate hike. In accordance with the CME Group’s Fed Watch Tool, markets are pricing in a less than 50% chance of two more 75-bps raises in the year’s final two FOMC meetings.
If FOMC Chairman Jerome Powell indicates that they aim to pause on tightening amid increased threats to the GDP outlook, the currency would suffer severe selling pressure, and US rates will fall sharply.
In that case, the EUR/USD could gain strength. Powell, on the other hand, may reassure markets that a 75 basis point boost is still on the table, as well as restate that the Fed will remain data-dependent and look for a continuous decrease in inflation before pulling their foot off the accelerator pedal.
If Powell increases the Fed’s aggressiveness the dollar may continue to outperform its key rivals, forcing the EUR/USD to fall.
EUR/USD Technical Analysis
The chart’s Relative Strength Index (RSI) indicator moves horizontally towards 50, highlighting EUR/indecision.
USD’s on the downside, 0.9880 (61.8% Fibonacci retracement of the most recent upswing) serves as initial support before 0.9850 (100-period SMA) and 0.9820. (200-period SMA).
A daily closure below that previous level could be interpreted as a big bearish development, attracting bears.
Before 0.9920 (Fibonacci 50% retracement) and 0.9960 (Fibonacci 38.2% retracement), 0.9900 (psychological level) serves as interim barrier.
If the pair manages to overcome those obstacles in the face of a dovish Fed surprise, it might retest 1.0000.
