The Euro (EUR) slipped modestly against the US Dollar (USD) on Wednesday, halting a five-day recovery streak. The pair retreated from highs near 1.1670 to trade around 1.1640, with downside attempts contained above the 1.1615 support zone. A firmer US Dollar ahead of the Federal Reserve’s (Fed) policy decision is weighing on the pair, though positive market sentiment is limiting further declines.
Caution Prevails Ahead of Fed Rate Decision
Investors are reluctant to add new short positions on the Dollar before the Fed’s interest rate announcement at 18:00 GMT. Markets widely expect a 25 basis point rate cut, bringing the target range down to 3.75%–4.00%. Attention will turn to Fed Chair Jerome Powell’s press conference for hints on whether another cut could follow in December.
The US Dollar Index (DXY) edged 0.15% higher, extending a modest recovery ahead of the meeting. Futures markets are currently pricing in a 91% probability of another rate reduction before year-end, highlighting the dovish expectations.
Traders also await potential updates regarding the Fed’s balance sheet reduction program (Quantitative Tightening), with speculation that the central bank could pause the process amid tighter credit conditions.
Euro Pressured by Softer Spanish Data
In the Eurozone, weaker Spanish economic figures are adding mild pressure to the Euro. Spain’s Q3 GDP slowed to 0.6% quarterly growth, below the 0.7% forecast, while year-on-year growth held steady at 2.8%. Retail sales also decelerated in September, rising 4.2% versus 4.5% in August.
Looking ahead, the European Central Bank (ECB) is widely expected to leave rates unchanged in Thursday’s meeting, with the deposit rate likely to remain at 2%. Investors will assess whether policymakers view the current stance as the terminal rate or see scope for further easing.
Technical Outlook: Support at 1.1615, Resistance at 1.1670
Technically, EUR/USD is consolidating within a narrow range after failing to sustain gains above 1.1670. Momentum indicators show a loss of bullish strength, with the 4-hour RSI retreating toward the 50 level and the MACD crossing below its signal line.
A confirmed break below 1.1615—where the October 27 low aligns with the short-term trendline—could invite further downside toward 1.1575, followed by 1.1545.
On the upside, resistance sits at 1.1670, followed by 1.1730 and 1.1780. A decisive move above these levels would signal a potential bullish breakout.
