EUR/USD Range Vulnerable as Rebound From 2018-Low Unravels
EUR/USD looks vulnerable following the European Union (EU) Summit as Moody’s Investor Services cuts the credit rating for Italy, and the rebound from the 2018-low (1.1301) may continue to unravel as the recent advance in the exchange rate fails to spur a run at the September-high (1.1815).
At the same time, the reaction to the Federal Open Market Committee (FOMC) Minutes instills a bullish outlook for the U.S. dollar as the central bank shows a greater willingness to extend the hiking-cycle, and a growing number of Fed officials may favor above-neutral interest rates especially asthe core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, climbs above the 2% target.
In turn, Chairman Jerome Powell & Co. may prepare U.S. households and businesses for an imminent rate-hike at the next meeting in November, and Fed Fund Futures may continue to reflect expectations for higher borrowing-costs in December as the committee largely achieves its dual mandate for full-employment and price stability.
With that said, the current environment may keep EUR/USD under pressure ahead of the European Central Bank (ECB) meeting on October 25, and recent price action raises the risk for a further decline in the exchange rate if it snaps the range-bound price action from earlier this month. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.
EUR/USD Daily Chart
EUR/USD appears to be marking another run at the monthly-low (1.1432) as it initiates a fresh series of lower highs & lows, with the near-term outlook capped by the string of failed attempts to clear the Fibonacci overlap around 1.1640 (23.6% expansion) to 1.1680 (50% retracement). In turn, the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region sits on the radar, with a break/close below the stated region raising the risk for a move towards the 1.1290 (61.8% expansion) hurdle, which sits just beneath the 2018-low (1.1301).
For more in-depth analysis, check out the Q4 Forecast for the Euro
Additional Trading Resources
Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.
Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.
--- Written by David Song, Currency Analyst
Follow me on Twitter at @DavidJSong.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.