EUR/USD held at 1.1234 on Wednesday as traders waited on the Federal Reserve's meeting minutes for fresh policy signals. The pair stays capped below its descending resistance line, with the dollar index gaining 0.3% to 102.13 on the day as oil prices climbed.
Fed minutes awaited as hawkish tone softens
EUR/USD stabilised at 1.1234 on Wednesday while investors waited for the release of minutes from the Fed's latest meeting. Weaker-than-expected PCE inflation and labour market data have pushed the Fed's rhetoric toward a less hawkish stance, and markets now put the probability of unchanged rates in October at almost 80%.
A separate read from CME FedWatch data points the same way: the chance of a hike of at least 25 basis points in October has dropped to 21.6%, down from about 51% a week ago, while a December hike is priced at 68.6%. Nomura's head of G10 FX strategy, Dominic Bunning, said of the long-dollar trade: "there's an element of momentum starting to slow here." Kansas City Fed President Jeff Schmid said on Tuesday the central bank needs to raise its policy rate further to lower inflation, even if higher long-term yields are weighing on activity in some parts of the economy.
Bonds and oil add to the inflation backdrop
Investors continue to watch the bond market after a recent sell-off, with pressure on Treasuries compounded by concerns over persistent inflation, growing fiscal risks and heavy debt issuance tied to AI project funding. Oil is rising too, as Iranian attacks on tankers in the Strait of Hormuz and clashes between Saudi and Houthi forces add to inflation risk. On the currency side, the euro gave back some of its prior gains after French bonds had rallied when the frontrunner in next spring's presidential election outlined plans to cut spending.
Pair stays bearish below 1.1244-1.1275
On the H4 chart, EUR/USD remains in a steady downtrend, having staged a corrective recovery to 1.1275 before a renewed decline back to the 1.1244 area. The price sits below the descending resistance line, and the MACD histogram stays in negative territory. A close below the nearest downside target of 1.1210 would open the way toward 1.1173 and, further out, 1.1129.
The H1 chart tells a similar story: the corrective move stalled near 1.1275, and the decline to 1.1230 confirmed selling pressure persists. The Stochastic oscillator sits in oversold territory below 20, so a short-term bounce is possible before the decline resumes. As long as the pair holds below 1.1244-1.1275, the main scenario points toward 1.1210, with a break below that level strengthening the case for a move to 1.1173.
Sources: ActionForex, Investing.com
Trading involves risk.
Risk Disclaimer
