EUR/USD sees meager rebound near 1.0900 as markets digest Fed meeting minutes

• EUR/USD looking for a foothold after backsliding into the 1.0900 handle.
• Latest meeting minutes see Fed officials attempt to cool market rate cut expectations.
• An absence of EU data on Wednesday leaves markets focusing on US PMI figures.

The EUR/USD slid into the 1.0900 handle on Wednesday after an equivocating Federal Reserve (Fed) put significant effort into not moving too far in either direction on rate cuts, keeping the US Dollar (USD) propped up amidst a broad-market recovery in the USD.

FOMC Minutes: Interest rates seem to be at or near peaks

The Fed successfully slid a softer package of rate discussions past the markets with little volatile reaction, with Fed officials noting that while rates appear to be at or near the peak, the main policy rate could hold higher for longer than markets are currently anticipating. While Fed officials agree that 2024 will see the start of the next rate cut cycle, cuts could come much later in the year than currently expected.

The Fed’s minutes from its December meeting reveal a US central bank that is much less dovish than market participants initially expected after Fed chairman Jerome Powell’s unexpected pivot at the last rate statement. 

The meeting minutes, in conjunction with comments from Richmond Fed President Thomas Barkin early Wednesday, will give investors betting on a fast pace of rate cuts through 2024 plenty of food for thought to chew on as 2024 gears up for a fresh print of the US Nonfarm Payrolls (NFP) on Friday.

Friday’s US NFP is expected to show a slight downtick in jobs additions, forecast to print at 170K for December versus November’s print of 199K.

Before that, Eurozone inflation figures are due earlier Friday, and the annualized Harmonized Index of Consumer Prices (HICP) for the year ended December is expected to rebound slightly from 2.4% to 3.0% as inflation continues to grip the European continent.

EUR/USD Technical Outlook

The EUR/USD’s late-Wednesday rebound from the 1.0900 handle sees the pair bouncing from a two-week low near 1.0893. Intraday action is firmly on the low side after the EUR/USD slid straight through the 200-hour Simple Moving Average (SMA) near 1.1020, sending the pair below the 1.1000 major handle on Monday and the pair is struggling to find the bullish momentum necessary to stage a corrective recovery.

Downside momentum looks increasingly likely with daily candles slipping back towards the 200-day SMA near 1.0850 with the 50-day SMA set to confirm a bullish crossover of the longer moving average. The EUR/USD has slid nearly 2% from last week’s peak bids of 1.1195, with technical support sitting at the last swing low into 1.0750.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels