Bearish view

• Sell the EUR/USD pair and set a take-profit at 0.9700.
• Add a stop-loss at 1.000.
• Timeline: 1 day.

Bullish view

• Set a buy-stop at 0.9900 and a take-profit at 1.0000.
• Add a stop-loss at 0.9800.

The EUR/USD price retreated to the lowest level since October 25 ahead of the upcoming interest rate decision by the Federal Reserve. It dropped to a low of 0.9855, which was about 2.3% below the highest level in October.
 

Fed decision ahead

The Federal Reserve will conclude its two-day meeting later on Wednesday. Economists have a mixed opinion about what to expect. Some, such as those from Bank of America and Goldman Sachs, believe that the bank will signal that it will continue hiking rates in a bid to fight the stubbornly high inflation.

The consensus is that the Fed will hike interest rates by 0.75% in this meeting, bringing the year-to-date increase to 375 basis points. The bank will also continue with its quantitative tightening policy in a bid to reduce the money supply.

The meeting comes at a time when the economy is flashing mixed signals. House prices have slumped after mortgage rates rose to the highest level in decades. At the same time, bonds have rallied, leading to an inverted yield curve. In most cases, such a curve is a positive sign of an upcoming recession.

On the other hand, the US has recently published mixed economic data. Last week, numbers showed that the economy expanded by 2.6% in the third quarter after falling to a recession in Q2. And on Tuesday, data by the ISM showed that the manufacturing PMI was 50.2, which is a sign of expansion.

The labor market is also tightening, with the number of job openings rising from 10.28 million in August to over 10.7 million in September.

The EUR/USD price will react mildly to a number of important economic data from Germany. The statistics agency will publish the latest employment data and trade numbers.
 

EUR/USD forecast

The EUR/USD price continued the sell-off that started last week as traders waited for the upcoming Fed decision. It has managed to move below the 25-day and 50-day moving averages and the key support at 0.9873. The Relative Strength Index (RSI) has moved slightly below the neutral point of 50. It also moved below the standard pivot point.

Therefore, the pair will likely continue falling as sellers target the next key support level a 0.9700. The stop-loss for this trade will be at the parity level.

(Click on image to enlarge)

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