EUR/USD remains stable at approximately 1.1125 during the early Asian session on Wednesday. The Fed is expected to maintain the benchmark rates at their current level during the October meeting. The Federal Reserve is poised to reveal its most recent policy decision on Wednesday, while the European Central Bank will follow suit on Thursday. The EUR/USD pair remains stable around 1.1125 in the early Asian session on Wednesday. Traders are opting to remain on the sidelines, refraining from making substantial positions in anticipation of the US Federal Reserve’s interest rate decision on Wednesday. Attention will pivot toward the European Central Bank policy meeting scheduled for later on Thursday. The Fed is widely anticipated to maintain the benchmark interest rate at the existing target range of 3.75% to 4.0% on Wednesday. Traders will closely scrutinise any indications that Fed Chair Kevin Warsh provides regarding their forecasts. Markets are reflecting a nearly 92.8% probability that the US central bank will maintain its current interest rates during the upcoming October policy meeting, as indicated by the CME FedWatch tool.
The probability of a US interest rate increase in December is currently assessed at 84.4%. “USD risks skew lower on a hold: hawkish messaging is broadly neutral, while a dovish hold risks outsized USD weakness,” said Bank of America analysts led by Mark Cabana. Across the pond, the Euro was on track to be the worst-performing developed-market currency in October, down 1.70% against the US Dollar. High energy costs, the volatility in French government bonds, and concerns regarding France’s fiscal position could apply downward pressure on the shared currency in the short term. The ECB is poised to maintain its key interest rates at their current levels during the forthcoming meeting on Thursday, subsequent to a 25 basis points increase in September. Strategists highlight that the Euro “really hasn’t been able to manage much of a bounce, regardless of shorts,” with “energy prices, fiscal concerns and social unrest” all weighing on the single currency. They add that “if the FOMC message (whatever that looks like in the brave new world) keeps December hike expectations alive, our bias is to remain dollar-positive, and unless the ECB is very hawkish, European economic fundamentals will weigh.”
Fed Chair Warsh conveyed a moderately constructive yet somewhat diminished message, as reflected by the FXS Speechtracker score of 5.6/10, which falls short of the established baseline of 6.1/10. The acknowledgement of being “over-scarred from the global financial crisis” emphasises a prudent approach to financial stability, even as Warsh points to structural growth and a surge in investment. This reinforces a vigilant posture rather than a definitive shift toward hawkish or dovish policies. Emphasising the importance of refraining from pre-judging forthcoming meetings, along with the uncertain near-term impact of AI on employment, underscores a reliance on data and a hesitance to indicate a predetermined policy trajectory. The FXS Fed Sentiment Index remained stable, recording a 0.00-point change and maintaining a firmly hawkish level of 127.51. This indicates that the speech largely aligned with prevailing expectations, rather than altering the policy narrative. In conjunction with the moderate FXS Speechtracker score, the steady FXS Fed Sentiment Index indicates that markets perceive Warsh’s remarks as reinforcing the existing hawkish stance without introducing new momentum for Dollar repricing.
In the daily chart, EUR/USD continues to experience pronounced bearish pressure, remaining below the 20-day simple moving average from the Bollinger Bands and significantly under the 100-day moving average, which collectively establish a prevailing topside cap. Price is positioned just beneath the lower Bollinger Band, indicating a continued downside bias. Meanwhile, the Relative Strength Index at 30.3 remains close to oversold territory, suggesting that although bears dominate the market, the downside may experience occasional corrective bounces. On the topside, immediate resistance is situated at the lower Bollinger Band approximately 1.1130, with further obstacles at the Bollinger mid-line close to 1.1205 and the upper band at 1.1280, preceding a more significant challenge at the 100-day moving average around 1.1440. With no significant support levels established by the current indicator set below the spot, any additional weakness would render the pair susceptible to probing new lows, while only a rebound above the 20-day SMA would begin to alleviate the existing bearish sentiment.
