EUR/USD bounds towards 1.0900, fueled by post-Fed risk bids

• The Federal Reserve pivoted on its rate hike policy, puts rate cuts on the table.
• The FOMC sees several rate cuts next year for a combined 75 basis points in cuts.
• The ECB’s Christine Lagarde has a tough act to follow on Thursday.

The EUR/USD saw a hard rebound on Wednesday, coming within inches of reclaiming the 1.0900 handle after the Federal Reserve (Fed) pivoted into a path towards rate cuts after months of towing the “higher for longer” line.

Forex Today: Dollar tumbles as Fed signals cuts in 2024

The Fed’s latest dot plot of policymaker interest rate expectations now sees at least three rate cuts on the table for 2024, for a combined 75 basis points in cuts. While investors’ hopes for rate cuts remain firmly higher than the Fed’s outlook, with money markets pricing in an eye-watering 140 basis points in cuts next year, the Fed’s dovish showing on Wednesday covered significant ground in meeting markets at the halfway point.

The Fed held rates at 5.5% for the third straight meeting, its longest stretch of no hikes since rates first started climbing in early 2022. 

ECB Preview: Forecasts from 10 major banks, more dovish direction as inflation trends to the downside

The European Central Bank (ECB) will have a tough act to follow in the Fed’s dovish pivot. The ECB is broadly expected to maintain its main reference rate at 4.5% when it delivers its last rate call of the year on Thursday. 

The ECB will deliver its final rate call and Monetary Policy Statement for 2023 at 13:15 GMT Thursday, followed by a press conference to be run by ECB President Christine Lagarde at 13:45 GMT.

EUR/USD Technical Outlook

The Euro caught a hard bid against the US Dollar on Wednesday, shearing the 200-hour Simple Moving Average (SMA) at 1.0800 and sending the EUR/USD within reach of the 1.0900 handle.

Intraday chart action has the 50-hour SMA set for a bullish cross of the 200-hour SMA, providing technical support for any potential pullbacks into the 1.0800 region.

Wednesday’s risk-on bid for the EUR/USD has the pair extending into the north side of the 200-day SMA drifting higher above thew 1.0800 handle, but the pair’s recent backslide from late November’s peaks at the 1.1000 major handle leave the pair hampered in familiar consolidation territory.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels