EUR/USD Teases Channel Breakout Ahead of Fed
After two weeks of consolidation, EUR/USD is teetering on the edge of a breakout as traders prepare for tomorrow's pivotal Federal Reserve rate decision. With market participants awaiting the outcome, let’s take a look at how EUR/USD is positioned ahead of this key event.
Powell’s Soft Landing Challenge
The Fed is widely expected to lower interest rates for the first time since the pandemic, signalling the start of a long-anticipated easing cycle that could extend well into 2025. As inflation concerns subside, the focus has shifted to job market stability, leaving Fed Chair Jay Powell with the difficult task of engineering a "soft landing" for the US economy.
Traders are left wondering: How aggressive will Powell be? Will the Fed opt for a cautious quarter-point cut or make a bolder statement with a half-point reduction? This decision could set the tone for the U.S. dollar, and EUR/USD is poised to react sharply.
For EUR/USD, tomorrow's rate announcement could be a key inflection point. A dovish Fed may weaken the dollar, driving the pair higher, while a more cautious stance could spark a continuation of the recent downtrend. Either way, this meeting is likely to be a major catalyst for price movement.
EUR/USD Price Action: Testing the Top of the Channel
Following a strong rally in August, EUR/USD has spent much of September consolidating within a descending retracement channel. Prices have steadily pulled back towards the 50-day moving average, forming a classic series of lower highs and lower lows.
However, recent price action suggests a shift may be on the horizon. Last week, EUR/USD bounced strongly off the lower boundary of the channel, and yesterday, the pair closed just above the upper trendline—hinting at a potential breakout. With the Fed’s rate decision looming, the market is watching closely to see if this breakout will be confirmed or if prices will fall back into the channel’s downward trajectory.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
On the hourly timeframe, the pair has formed a small consolidation range near the top of the descending channel. This mini-range is giving short-term traders opportunities to enter swing trades, using the range as a trigger for potential breakouts. A decisive move above this range would confirm the breakout on the daily chart, while a failure to hold these levels could signal a rejection, pushing EUR/USD back into its recent pattern.
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Prepare for Volatility
While the technical setup looks promising, traders should brace for heightened volatility around tomorrow’s Fed decision. Powell’s commentary and the rate cut itself are likely to cause sharp price fluctuations in EUR/USD. These high-impact events can result in unpredictable price swings, so it’s essential for traders to adjust their risk management strategies and ensure proper stop placements.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Powell’s Soft Landing Challenge
The Fed is widely expected to lower interest rates for the first time since the pandemic, signalling the start of a long-anticipated easing cycle that could extend well into 2025. As inflation concerns subside, the focus has shifted to job market stability, leaving Fed Chair Jay Powell with the difficult task of engineering a "soft landing" for the US economy.
Traders are left wondering: How aggressive will Powell be? Will the Fed opt for a cautious quarter-point cut or make a bolder statement with a half-point reduction? This decision could set the tone for the U.S. dollar, and EUR/USD is poised to react sharply.
For EUR/USD, tomorrow's rate announcement could be a key inflection point. A dovish Fed may weaken the dollar, driving the pair higher, while a more cautious stance could spark a continuation of the recent downtrend. Either way, this meeting is likely to be a major catalyst for price movement.
EUR/USD Price Action: Testing the Top of the Channel
Following a strong rally in August, EUR/USD has spent much of September consolidating within a descending retracement channel. Prices have steadily pulled back towards the 50-day moving average, forming a classic series of lower highs and lower lows.
However, recent price action suggests a shift may be on the horizon. Last week, EUR/USD bounced strongly off the lower boundary of the channel, and yesterday, the pair closed just above the upper trendline—hinting at a potential breakout. With the Fed’s rate decision looming, the market is watching closely to see if this breakout will be confirmed or if prices will fall back into the channel’s downward trajectory.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
On the hourly timeframe, the pair has formed a small consolidation range near the top of the descending channel. This mini-range is giving short-term traders opportunities to enter swing trades, using the range as a trigger for potential breakouts. A decisive move above this range would confirm the breakout on the daily chart, while a failure to hold these levels could signal a rejection, pushing EUR/USD back into its recent pattern.
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Prepare for Volatility
While the technical setup looks promising, traders should brace for heightened volatility around tomorrow’s Fed decision. Powell’s commentary and the rate cut itself are likely to cause sharp price fluctuations in EUR/USD. These high-impact events can result in unpredictable price swings, so it’s essential for traders to adjust their risk management strategies and ensure proper stop placements.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.