EUR/USD is trading around 1.1640 after dropping to a weekly low of 1.1615. The US Dollar is losing some recent gains as traders wait for the Federal Reserve’s decision on monetary policy. A 25-basis-point rate cut from the Fed is widely expected. Traders are focused on rate projections and Chairman Jerome Powell’s press conference for further guidance. Recent US data shows job openings have risen to 7.67 million in October, surpassing expectations. Previous inflation numbers also hint at a possible “hawkish cut” by the Fed. EUR/USD is below a trendline support at 1.1665. Technical indicators like MACD and RSI show mild bearish momentum. The Fed aims to keep inflation at 2% and maintain full employment. Changes in interest rates can significantly impact the strength of the US Dollar. The job market in the US remains strong, with rising job openings that suggest steady economic momentum. Meanwhile, the European Central Bank maintains a positive growth outlook, indicating an end to its easing phase. In currency percentage changes, the Euro is the strongest against the Canadian Dollar, while other currencies are showing varied movements against one another. With the Fed’s decision just hours away, the market has already accounted for a quarter-point rate cut. The key for traders will be the Fed’s future guidance and Powell’s tone. Any surprise in messaging could lead to a significant market shift. Recent data supports the notion of a “hawkish cut,” where rates drop now but a pause is suggested. Last week’s employment report showed a growth of 199,000 jobs and unemployment dropping to 3.7%. Coupled with last month’s inflation rate of 3.1%, this gives the Fed a reason to be cautious about inflation. If Powell highlights this strong data, the US Dollar could strengthen. Under this scenario, traders might look to increase bearish EUR/USD positions and consider put options targeting a drop below 1.1600. The failure of the pair to recover the 1.1665 trendline already indicates weakness. On the flip side, there is a risk that the Fed might be more worried about an economic slowdown than the data reflects. After aggressive rate hikes in 2022 and 2023, policymakers are careful not to over-tighten the economy. A surprising dovish message from Powell, suggesting more cuts in 2026, could weaken the dollar significantly. If the Fed indicates a more aggressive easing strategy, we would reconsider our position and look to buy. Purchasing call options on EUR/USD would be a strategy to benefit from a strong move past 1.1682 resistance. This could be further supported by the European Central Bank’s recent statements suggesting the end of its easing cycle. Due to the binary nature of this event, volatility is expected. For traders hesitant to predict a direction, using strategies like a long straddle might work well. This would allow for profit from a significant price move in either direction after the announcement. Looking forward, the key factor will be the differences between the Fed and other central banks. While US inflation remains a concern, recent Eurozone data shows inflation cooling to 2.4%, which may limit how aggressive the ECB can be. We will closely monitor this policy gap, as it will likely shape the primary trend for EUR/USD into 2026.

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