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• The EUR/USD pair has formed a double-top pattern on the daily chart.
• The Federal Reserve pointed to rate cuts in 2023.
• The European Central Bank noted that rates will remain high for a while.

The EUR/USD pair formed a double-top pattern as traders reflected on the latest ECB and Federal Reserve decisions. The pair was trading at 1.0957, a few points below this week’s high of 1.1015.
 

Federal Reserve decision

The EUR to USD pair was in the spotlight this week as investors reacted to key economic numbers and events. On Tuesday, the US published the latest inflation numbers, which showed that prices remained at an elevated level.

According to the Bureau of Labor Statistics (BLS), the headline Consumer Price Index (CPI) dropped slightly to 3.0% in November. Core inflation, which excludes the volatile food and energy prices, remained at 4.0%. 

The other crucial event came on Wednesday when the Federal Reserve published a relatively dovish statement. As was expected, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. 

Most importantly, the bank pointed to a three interest rate cuts in 2024. Analysts believe that the bank could start these cuts in March if inflation continues falling. They also see the bank delivering more than three rate cuts. 

That will be an extreme change of tune by the Fed, which has embraced an extremely hawkish tone in the past two years. In all his statements, Jerome Powell pointed to a higher-for-longer situation.
 

European Central Bank's decision

The other important EUR to USD news happened on Thursday when the European Central Bank delivered its decision. Like the Federal Reserve, the bank decided to leave rates unchanged at 4.25%.

However, unlike the Fed, the ECB noted that it would maintain higher interest rates for longer. It noted that inflation would remain above its target level for a longer period. It sees its inflation averaging 5.4% in 2023 and 2.7% in 2024 and 2.1% in 2025. That was a lower inflation target than the previous estimate.

Still, there is a likelihood that the ECB will cut rates now that the economy is slowing. According to S&P Global, the bloc’s manufacturing and services PMI numbers were worse than expected. They dropped to 44.2 and 48.1, respectively. A PMI reading of less than 50 is a sign that a sector is contracting.
 

EUR/USD technical analysis

(Click on image to enlarge)

EURUSD chart by TradingView

The daily chart reveals that the EUR/USD pair has formed a double-top pattern at 1.1014. In price action analysis, this is one of the most accurate bearish signs in the market. The neckline of this pattern is at 1.0723.

Most importantly, the pair has formed a head and shoulders pattern, which is a bearish sign. Therefore, there is a likelihood that the pair will have a bearish sign. If this happens, the initial target to watch will be the neckline at 1.0723.

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