- Traders are focused on when the Federal Reserve might start cutting rates.
- Futures indicate a 30 percent chance the Fed could start cutting interest rates as early as next March.
- The euro hit its highest point in more than two months.
As we head into the new week, the dollar has extended its downward path, painting an optimistic picture for the EUR/USD forecast. In response to the weaker dollar, the euro rose to a level above $1.0924. Consequently, it reached its highest point in more than two months.
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Traders reinforced their belief that US rates have peaked and turned their attention to when the Fed might start cutting rates. Notably, the dollar index reached 103.64, its weakest point since September 1. This extends its nearly 2% decline from last week, its biggest weekly drop since July.
Weaker-than-expected US economic indicators, particularly a below-estimated inflation reading, led markets to rule out further rate hikes by the Fed.
Now the focus is on the timing of the first rate cut. Furthermore, futures indicate a 30% chance the Fed could initiate a rate cut as early as next March, according to the CME FedWatch tool.
“The market is likely to hold prices relatively steady for FOMC policy this week.” Therefore, there will be limited catalysts for significant dollar moves,” said Carol Kong, strategist at Commonwealth Bank of Australia. Moreover, she said: “If risk appetite improves, the dollar has the potential to weaken further.”
Meanwhile, investors await minutes from the Fed’s latest meeting later this week. This will provide insight into Fed policy.
EUR/USD key events today
Investors are not expecting any key economic reports from the US or the Eurozone. Therefore, the pair is likely to consolidate.
EUR/USD Technical Forecast: Bullish momentum declines above 1.0900.
The bias for EUR/USD on the 4-hour chart is bullish, with the price making a new high. EUR/USD is currently trading above the key level of 1.0900. However, the bulls are not making as strong candles as when the price broke above the key level of 1.0750.
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Moreover, the RSI is showing a bearish divergence with the price. This indicates weaker momentum in the bullish move. Accordingly, the bears may experience a deep pullback or reversal. If this is the case, the price is likely to break below the 30-SMA to retest the key level of 1.0750.
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