EUR/USD price outlook: Markets brace for Fed and ECB meetings

Euro To US Dollar – price news, and analysis

• Markets Await major Central Banks ‘Meetings
• Key Technical Levels for the Euro to Dollar Pair

This week, markets are focused on the upcoming Federal Reserve and European Central Bank meetings, as well as the press conferences from Fed Chair Jerome Powell and ECB President Christine Lagarde.

Federal Reserve Outlook
The Federal Open Market Committee is widely expected to keep interest rates unchanged. This expectation is supported by stronger-than-anticipated labour market data from December’s jobs report and inflation rebound, as revealed by the latest US Consumer Price Index. However, investors are keenly watching for clues about the Fed’s future monetary policy trajectory and any potential tension between former US President Donald Trump and Chair Powell, given past hints reflecting disagreement with Fed policies.

European Central Bank Outlook
The ECB is anticipated to cut interest rates by 25 basis points. According to recent hints from ECB members, the central bank aims to reach a “neutral” rate—neither stimulating nor restraining economic growth—potentially targeting levels around 2%. However, this policy adjustment faces complexities, particularly amid the ongoing trade tensions between the US and Europe. These tensions, marked by the possible imposition of tariffs on each other’s goods, could disrupt supply chains, drive inflation higher, and limit the ECB’s ability to lower rates further.

Euro Vs US Dollar – Daily Chart

Chart Source: ADSS Platform

On January 13, the EUR/USD pair hit its lowest level in over two years before rebounding as traders took profits. A positive divergence has emerged, with the price forming a lower low while the Relative Strength Index (RSI) formed a higher low. This suggests the potential for a trend reversal.

Currently, the pair is trading within a zone of 1.0200–1.0497. While prices have closed above the 50-day moving average, they have failed more than once to break out of the trading range.

• Bullish breakout: A daily close above the high end of the mentioned zone of 1.0497 would indicate the potential for further upward momentum, with a possible rally towards 1.0695.
• Bearish Rejection: If prices continue to fail at the high end of the mentioned zone, this would reflect insufficient bullish momentum, potentially leading to a decline toward the low end at 1.0200.