EUR/USD turned negative on the daily chart after failing to reclaim 1.1650 and is trading around 1.1635 at the time of writing. Recent price action reflects market hesitation, with investors cautious about taking large US Dollar positions ahead of Wednesday’s Federal Reserve policy decision.
Futures markets indicate a nearly 90% probability of a 25-basis-point rate cut by the US central bank, according to CME Group’s FedWatch Tool. Market attention will focus on the tone of the policy statement, any revisions to interest rate projections (the dot plot), and Chairman Jerome Powell’s press conference, which will offer clues about the Fed’s next moves.
Before the Fed’s announcement, the US weekly ADP Employment Change report and the JOLTS Job Openings will provide insights into the US labour market, particularly relevant this week as November’s Nonfarm Payrolls report will not be released until next week.
Daily digest market movers: the dollar treads water ahead of the Fed
The US Dollar (USD) broadly retains Monday’s gains, supported by higher Treasury yields and risk-off sentiment following a 7.5-magnitude earthquake in northern Japan. The US Dollar Index (DXY) continues to trade sideways near six-week lows around 98.75.
Investors are largely on the sidelines, awaiting guidance from Wednesday’s Fed meeting. Chairman Powell is expected to deliver a hawkish tone, hinting at a potential pause in rate changes over the coming months. However, committee divisions and speculation about White House advisor Kevin Hassett replacing him in May may sustain market expectations for further easing.
Japan’s earthquake prompted evacuations and a tsunami warning, later downgraded to an advisory. Early government reports indicate 13 injuries, with figures still preliminary.
US President Donald Trump added pressure on the Fed in a Publico interview, criticizing Powell for not lowering borrowing costs more aggressively and signaling that support for “immediate rate cuts” could influence the selection of the next Fed Chair.
Market focus on Tuesday will shift to the US JOLTS Job Openings report for September and October, expected to remain stable at 7.2 million openings, following August’s 7.22 million.
In the Eurozone, the main event is a speech by Bundesbank President and ECB Council member Joachim Nagel, likely to reaffirm that monetary policy will remain steady for the foreseeable future.
Data released on Monday showed Eurozone Sentix Investor Sentiment improving to -6.2 in December from -7.4 in November. The index measuring sentiment on the current economic situation rose to -16.5 from -17.5, with economic expectations climbing to 4.8 from 3.3. The impact on the Euro was limited.
ECB board member Isabel Schnabel indicated comfort with market expectations of a rate hike, while Latvian Central Bank Governor and ECB board member Martins Kazaks dismissed the likelihood of a December increase.
Technical analysis: EUR/USD drops below trendline support
EUR/USD maintains the bullish trajectory from mid-November lows, but Monday’s decline pushed the price below the trendline support, signaling weakness. Technical indicators are turning lower: the 4-hour Relative Strength Index (RSI) fell below the key 50 level, and the Moving Average Convergence Divergence (MACD) continues trending under the signal line.
Failure to recover the trendline near 1.1650 may increase downside pressure toward Monday’s low at 1.1616, followed by December 1–2 lows around 1.1590, and the November 26–28 lows in the 1.1550–1.1555 area.
On the upside, a move above 1.1650 would shift focus to the December 4 high near 1.1680, with the next target at the October 17 high around 1.1730.
