The EUR/USD pair has seen a recent downturn, retreating after a hawkish statement from the Federal Reserve. The pair dropped to a low of 1.0400, moving away from this week’s high of 1.0530. This movement comes ahead of significant European economic data releases and a highly anticipated European Central Bank (ECB) interest rate decision.
Federal Reserve Decision and Market Reaction
The Federal Reserve recently held its first meeting of the year, maintaining interest rates unchanged between 4.25% and 4.50%. The key takeaway was the removal of language suggesting progress on inflation, indicating the Fed expects inflation to remain elevated above its 2% target. The Fed also noted a stable unemployment rate, suggesting a strong labor market. This has led to expectations that the Fed will likely hold rates steady, awaiting further economic clarity.
Upcoming European Data and ECB Decision
Attention is now turning towards Europe, with the release of fourth-quarter GDP data, industrial sentiment, and unemployment figures, alongside the ECB’s rate decision. Economists anticipate a modest 0.1% growth in the Eurozone economy in Q4, resulting in an annual growth rate of 1.0%.
The ECB is widely expected to implement a cautious 0.25% rate cut, potentially signaling a pause after this move. The bank seems to be encouraged by recent signs of stabilization in the European economy.
US GDP Data Also in Focus
Simultaneously, the US will release its first estimate of Q4 GDP, with economists forecasting a growth of 2.7%. This data will provide further insight into the economic outlook of the world’s largest economy.
EUR/USD Technical Analysis and Trading Outlook
From a technical standpoint, the EUR/USD pair has broken below the key support level at 1.0450, reaching its lowest point since October 2023. It has also moved below the 50-day moving average, and the Relative Strength Index (RSI) is trending downward. Based on the Murrey Math Lines tool, the pair is showing weakness and the potential for further decline.
Trading Recommendations
Bearish Scenario:
- Action: Sell EUR/USD
- Take-Profit: 1.0250
- Stop-Loss: 1.0550
- Timeline: 1-2 days
Bullish Scenario:
- Action: Buy EUR/USD
- Take-Profit: 1.0550
- Stop-Loss: 1.0250
- Timeline: 1-2 days
Key Points to Consider:
- Volatility: Expect volatility around the ECB decision and economic data releases.
- Risk Management: Always use stop-losses to manage risk.
- Market Analysis: Consider these trading recommendations as part of a broader analysis. The market situation is dynamic and traders need to monitor any changes.
- Discretion: Trading decisions should be made according to your risk tolerance and individual analysis. This article is not financial advice.
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