EUR/USD Price Analysis: Fed Fuels Rate Hike Speculation

  • Various Federal Reserve speakers hinted at the possibility of imminent rate hikes.
  • Traders are awaiting a speech from Chair Jerome Powell.
  • Futures suggest a roughly 17% chance of another Fed rate hike by January.

In Wednesday’s EUR/USD price analysis, a bearish tone dominated the scene as the dollar staged a comeback. This resurgence came in the wake of various Federal Reserve speakers who hinted at the possibility of imminent rate hikes. At the same time, traders awaited a speech from Chair Jerome Powell regarding the central bank’s future policy direction.

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Notably, the greenback experienced a drop last week following the Fed’s decision to maintain its policy rate. Moreover, there were signs of a cooling US labor market. However, it stabilized as the market remained uncertain about whether US interest rates had reached their peak. Additionally, there is uncertainty about how soon the Fed might consider easing monetary conditions. 

Several Federal Reserve policymakers maintained a neutral tone on Tuesday while assessing the need for additional rate hikes.

Futures suggest a roughly 17% chance of another rate hike by January. However, they also indicate a 21% likelihood of rate cuts as early as March, according to the CME FedWatch tool. 

Attention now shifts to remarks from Fed Chair Powell later on Wednesday. Simpson commented, “There’s a risk that we might observe further strength in the US dollar today if Powell and others continue to emphasize their ‘higher for longer’ outlook.”

Meanwhile, the euro faced pressure due to weak German data reported on Tuesday. Data revealed a larger-than-expected decrease in German industrial production in September. 

EUR/USD key events today

All focus today will be on one major event from the US.

  • Fed Chair Powell’s speech.

EUR/USD technical price analysis: Bears test a solid support zone.

EUR/USD 4-hour chart

The EUR/USD price has dipped to a solid support zone comprising the 30-SMA and the 1.0675 support level. On the other hand, the RSI has fallen to the pivotal 50 mark. However, this decline comes in an uptrend where the price has made higher highs. Therefore, the pullback might make a higher low if the support zone holds firm. 

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Moreover, it would allow bulls to rechallenge the 1.0750 resistance level for a new high. However, if bears are strong enough to breach the support zone, the price will likely decline to 1.0600.

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