Today’s EUR/USD forecast paints a picture of bearish sentiment as the dollar flexes its muscles in anticipation of the upcoming FOMC policy meeting. Meanwhile, ECB policymakers are getting more comfortable with the market’s rate-cut expectations, weakening the euro.

Market participants are focused on the Fed policy meeting, which concludes later in the day. The Fed will likely hold rates at current levels, but the focus will be on the press conference and the economic projections. 

Investors are eager to hear what policymakers will say regarding the recent inflation figures. Powell’s press conference might shed light on the outlook for rate cuts in 2024, which has changed significantly since the start of the year. At the moment, markets expect the Fed to cut rates by a total of 73 bps this year. This is a big drop from 150 bps at the start of the year. If policymakers take on a hawkish tone, this figure could further decline. Moreover, investors might push expectations for the first rate cut to July.

On the other hand, European Central Bank policymakers are ready for the first rate cut in June. Notably, ECB policymaker Martins Kazaks said on Tuesday that he supported market expectations for three cuts in 2024.

The outlook for interest rate cuts seems much clearer in the Eurozone than in the US. While ECB policymakers are ready for cuts, Fed policymakers could remain cautious amid high inflation. Consequently, EUR/USD could witness more declines.

EUR/USD key events today

• Federal Funds Rate
• FOMC Economic Projections
• FOMC Statement
• FOMC Press Conference

EUR/USD technical forecast: Channel breakout

(Click on image to enlarge)

EUR/USD 4-hour chart

On the charts, the EUR/USD trend has reversed from bullish to bearish. The bears confirmed the new direction when they broke out of their bullish channel. Moreover, the price retested the channel support before making lower lows.

At the same time, the 30-SMA now faces down, showing a downtrend. Meanwhile, the RSI trades in bearish territory below 50, indicating solid bearish momentum. The price was ready to reverse when it met the 1.0950 barrier. It made a double top before breaking below the SMA and the bullish channel. Given the strong bearish bias, the price might soon retest the 1.0800 key support level.

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