EUR/USD barely recovers as markets digest FOMC minutes

The EUR/USD pair is attempting to regain support after retreating into the 1.0900 handle. According to the most recent meeting minutes, the Fed is trying to lower market expectations for rate cuts. Markets are concentrating on US PMI data on Wednesday due to the lack of EU data.

The Fed made a great effort to avoid going too far in either direction on rate cuts, which kept the US Dollar supported amid a broad-market rally. As a result, the EUR/USD fell into the 1.0900 handle on Wednesday.

With minimal market volatility, the Fed was able to get through a softer package of rate discussions. Fed members noted that although rates seem to be at or near their top, the main policy rate may remain higher for longer than the markets are currently expecting. Although Federal Reserve officials concur that the next cycle of rate reductions will begin in 2024, the rate cuts may occur much later in the year than anticipated.

Following Fed chairman Jerome Powell’s surprise turnabout at the most recent rate announcement, the US central bank is far less dovish than market investors had anticipated, according to the Fed’s December meeting minutes.

As 2024 prepares for a new print of the US Nonfarm Payrolls on Friday, investors relying on a rapid pace of rate cuts through 2024 will have lots to consider after reading the meeting minutes and remarks made by Richmond Fed President Thomas Barkin early on Wednesday.

The US Nonfarm Payroll (NFP) on Friday is predicted to indicate a minor decline in job growth, with a print of 170K for December compared to a print of 199K for November.

Prior to that, the annualised Harmonised Index of Consumer Prices (HICP) for the year ended December is anticipated to slightly increase from 2.4% to 3.0% as inflation continues to wrack the European continent. Eurozone inflation numbers are due earlier this Friday.

The EUR/USD pair is rising from a two-week low near 1.0893 thanks to its late-Wednesday recovery from the 1.0900 mark. After the EUR/USD plunged through the 200-hour Simple Moving Average (SMA) at 1.1020 on Monday, breaking below the 1.1000 key mark, intraday action is firmly on the negative side. The pair is now unable to muster the bullish momentum needed to mount a corrective comeback.

With daily candles retreating towards the 200-day SMA around 1.0850 and the 50-day SMA poised to validate a bullish crossover of the lengthier moving average, it appears like downside momentum is gaining traction. From the peak bids of 1.1195 last week, the EUR/USD has dropped by about 2%, with technical support located below the most recent swing low of 1.0750.