EUR – Fed Rate Cut Almost a Certainty, Focus on Post-Meeting Statement

This week features a series of central bank meetings, the most anticipated being the Federal Reserve meeting. The market has largely priced in a rate cut, and investors are speculating whether the Fed will signal a more dovish stance than expected. In addition, the central banks of Australia, Canada, and Switzerland will also hold interest rate meetings, but none are expected to make any adjustments to their monetary policies.

Last week's data showed that US consumer spending grew only slightly at the end of the third quarter, reinforcing market expectations for a December rate cut. However, investors are still awaiting clues from the Fed regarding future policy direction, potentially making this the most divided meeting of policymakers in recent years. According to the CME FedWatch tool, traders currently expect an approximately 89% probability of a 25 basis point rate cut on Wednesday.

The euro traded sideways in a high range against the dollar on Monday. Unlike the Fed, the European Central Bank (ECB) is not expected to cut rates again in the next year. Influential ECB Executive Board member Schnabel stated on Monday that the central bank's next move could even be a rate hike. Furthermore, a series of recent strong data points have influenced expectations for further interest rate cuts by the European Central Bank in 2026. German industrial production rose more than expected in October. Last week's data showed that consumer prices rose more than expected, and business activity reached a two-and-a-half-year high.

From a technical chart perspective, if the euro/dollar exchange rate can maintain its position above the 100-day moving average of 1.1640 in the short term, the current stable trend of the euro will not be broken. However, given that it has encountered resistance at the 1.17 level for the past two months, a further break above this level is needed for the euro to resume its upward trend. Resistance is expected at 1.1760 and 1.1800, with the next level targeting 1.20. Support is initially seen at 1.1610 and the November 5th low of 1.1468, followed by support at the 1.14 level. A further break below this level would present more significant downward pressure on the euro. The next major supporting level is at 1.1310.

Forecast range:
Resistance 1.1700* - 1.1760 – 1.1800 – 1.2000*
Support 1.1640 – 1.1610 - 1.1468 - 1.1400* – 1.1310

News summary
8/12 ECB Governing Council Member Kazimir: Central Bank Must Be Wary of Upside Risks to Inflation
Eurozone December SENTIX Investor Confidence Index -6.2
German Industrial Production Rises 1.8% in October

Focus:
Tuesday
Germany October Imports, Exports and Trade Balance (15:00)

Friday
Germany November CPI and HICP Final Readings (15:00)

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