The EURUSD currency pair showed a moderate decline on Wednesday, after reaching its highest level this year — 1.1131. This level was set against the backdrop of a possible interest rate cut in the U.S. Investors are awaiting the release of the minutes from the last meeting of the Federal Reserve (Fed) to assess the extent of the upcoming reduction in borrowing costs.

 

The pair has gained 2.74% over the past six months, supported by geopolitical tensions and expectations of monetary easing in the U.S. and Europe.

 

According to CME FedWatch data, there is a 68% probability of a 25 basis point rate cut at the Fed’s September meeting. Against this backdrop, the dollar has reached its lowest levels of the year against its major counterparts.

 

Traders’ attention will now turn to the minutes of the July FOMC meeting, which will be released today. Fed Chairman Jerome Powell’s speech on Friday at the Jackson Hole symposium, where he will talk about the prospects of the U.S. economy, is also of great interest.

 

On the other side of the ocean, European Central Bank (ECB) spokesman Olli Rehn announced a possible interest rate cut in September earlier this week. As he noted, the growing risks to the eurozone economy have strengthened the case for such a decision. Traders are pricing in a 90% probability of a 25 basis point cut in the ECB’s deposit rate to 3.5% in September, with another cut expected before the end of the year.

 

In terms of technical analysis, EURUSD is trading within a wide corrective channel on the D1 chart, with the price approaching the main resistance level of 1.1139. The divergence of the Relative Strength Index (RSI) (standard values) indicates a possible change in direction of the rate to the downside within a broad correction.

 

Signal:

Short-term prospects for EURUSD suggest selling. 

The target is at the level of 1.0900.

Part of the profit should be taken near the level of 1.1020.

A stop-loss could be placed at the level of 1.1270.


The bearish trend is short-term, so trade volume should not exceed 2% of your balance.