EUR/USD Faces Headwinds: Fed Rate Cuts and Technical Trends Keep Gains in Check

EUR/USD lost its shine after a hawkish rate cut by the Fed. It hit an intraday low of 1.03433 and is currently trading around 1.03630.

Federal Reserve's Rate Cut Overview
The Federal Reserve recently cut its benchmark interest rate by 25 basis points, bringing it to a range of 4.25% to 4.5%. This is the third rate cut in 2024, totaling a 1 percentage point reduction since September. The Fed now plans to make only two more rate cuts by the end of 2025, down from four, due to rising inflation expectations. Although inflation has cooled slightly, it remains above the Fed's target of 2%, leading to a cautious approach in further rate changes. The decision was not unanimous, as Cleveland Fed President Beth Hammack preferred to pause cuts. The Fed's positive outlook includes steady growth and low unemployment, but it faces challenges with ongoing inflation. Overall, while rate cuts are happening, a slow and careful approach is expected moving forward.

U.S. Economic Growth Revision
The U.S. economy's growth for the third quarter of 2024 has been revised upward to 3.1%, an increase from the earlier estimate of 2.8%. This revision reflects better-than-expected performance, driven by a 3.7% rise in consumer spending, increased exports, and more federal government spending, especially in defense. The new growth rate is slightly higher than the 3.0% growth seen in the previous quarter. Current dollar GDP also grew by 5.0%, reaching about $29.37 trillion. Overall, this revision shows that the U.S. economy is resilient despite challenges like inflation and high interest rates.

Technical Analysis of EUR/USD
The pair remained below both short-term (34 and 55-4H EMA) and long-term (200-4H MA) moving averages. Near-term resistance is at 1.0435, and a breakout above this could push the pair towards targets at 1.04635, 1.0500, 1.0550, 1.0600, and possibly 1.0660. Major bullish momentum is expected only if prices surpass 1.0700, which would open the door to 1.0760 and 1.0800. On the downside, immediate support is at 1.0340; a drop below this could lead to further declines to 1.0300/1.0240.

Market Sentiment and Trading Strategy
The Commodity Channel Index (CCI) indicates a bearish trend, while the Average Directional Movement Index (ADX) suggests a neutral outlook. Given the weak sentiment in technical indicators, a sensible strategy would be to sell on rallies around the 1.0435 mark, with a stop-loss at 1.0470 and a target price of 1.0340 for potential gains.