Powell is not in a hurry, prices come first: How far can EUR/USD go?
2025-09-18 18:12:59
During the European trading session on Thursday (September 18), the euro rebounded against the dollar, re-entering above 1.1830, and then fluctuated around 1.1840. Following the Federal Reserve's scheduled 25 basis point rate cut, the dollar briefly rallied on the relatively less dovish tone of its statement and press conference, but the momentum quickly cooled. A modest recovery in risk appetite provided support for the exchange rate.
The Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 4.00%-4.25%. The dot plot indicates a "risk-management" easing path for the year, with two more rate cuts expected in 2025 and one in 2026. However, significant disagreement among members has heightened uncertainty about the ultimate path. After the meeting, Jerome Powell emphasized the "risk-management" nature of the rate cuts, warning that inflation will remain volatile for the remainder of the year and into 2026, and that he is "in no rush" to cut further. This statement provided a short-term boost to the dollar's nominal and real interest rate differential, but did not reverse the downward trend that had been underway since the evening session.
Looking ahead to recent data, tonight's US initial jobless claims and the Philadelphia Fed manufacturing index will provide marginal clues for the US dollar. Barring any significant surprises, the market's pricing in a combination of "slowing growth and moderate inflation" is likely to persist, thus limiting the dollar's potential for a rebound. The latest macroeconomic data also supports this narrative: US retail sales rose by 0.6% month-over-month and 5.0% year-over-year in August, both exceeding market expectations of +0.2% and +4.1%. July's data was revised upward to +0.6% month-over-month and +4.1% year-over-year, demonstrating continued consumer resilience. However, this does not alter the broader context of marginally weakening labor markets. The Federal Reserve's economic forecasts indicate that GDP growth is revised upwards to 1.6% this year and 1.8% next year; PCE is projected to reach 3.0% by year-end, moderating to 2.6% by 2026, higher than the June forecast; and the unemployment rate remains unchanged at 4.5% by year-end, falling slightly to 4.4% in 2026. Divergence on interest rate paths is widening: the most hawkish scenario points to around 4.4% by the end of the year, while the lowest scenario (interpreted by the market as the preference of new member Stephen Miran) points to 2.9%, which also reduces the reference value of the "median" itself.
On the euro front, ECB Vice President Luis de Guindos described the current monetary policy as "appropriate," allowing for small deviations from the inflation target. Economic growth is expected to remain sluggish in the second half of the year, but risks are "more balanced." Meanwhile, the Eurozone's High Consumer Price Index (HICP) rose by 0.1% month-over-month and 2.0% year-over-year in August, both below expectations (+0.2% and +2.1%). Core inflation rose by 0.3% month-over-month and 3.1% year-over-year, unchanged from July. This combination suggests that declining inflationary pressures are maintaining room for easing, but the combination of "not overly dovish" policy communication and a rebound in risk appetite is more likely to support the exchange rate in the short term than to suppress it. Taken together, the dollar's temporary correction and the narrative of the euro's fundamentals shifting from neutral to slightly warmer are pushing EUR/USD back into a volatile, positive pattern above 1.1830.
Looking at the daily chart, the middle Bollinger Band is currently at 1.1699, the upper Bollinger Band is at 1.1833, and the lower Bollinger Band is at 1.1565. The exchange rate has crossed the upper Bollinger Band and is trading sideways above it on a shrinking volume, forming a short-term "moving higher along the upper Bollinger Band" pattern, indicating a continuation of the upward trend and a simultaneous increase in volatility.
At the indicator level, MACD shows DIFF=0.0044, DEA=0.0030, and the histogram is about +0.0030. The "golden cross" above the zero axis continues, but the column has not yet expanded significantly, and the momentum has improved but not overheated; RSI (14) is near 61.45, which is in the bullish market sentiment band of 50-70 and has not yet reached the overbought threshold.
Combining the candlestick's real body and upper shadow, the current pattern suggests a pullback followed by consolidation after a breakout. A pullback to the upper Bollinger Bands of 1.1833 and 1.1860 would signal a reversal of resistance-turned-support and support-turned-resistance patterns. A dip back within the band would provide initial support at the middle Bollinger Band of 1.1699, with further support below at 1.1565 and the previous low of 1.1391. Overall, the trend remains in an upward trajectory, but caution is advised in the short term regarding the potential for false breakouts and true pullbacks.
Upside Scenario (Bull Trend): If the exchange rate remains above the upper Bollinger Band of 1.1833 and demonstrates volume-led activity in backtesting, it could retest the 1.1918 high. Weak US initial jobless claims, a weakening Philadelphia Fed, and continued cooling in monthly inflation and wage growth could limit the dollar's potential for a temporary rebound, potentially leaving the euro/dollar market open for a sustained "slow bull run" along the upper band. Strategically, monitor the typical "trend-retracement-upward" pattern along the upper band, avoiding chasing higher prices when indicators approach overbought territory to avoid short-term squeezes.
Downside Scenario (Bearish): If the exchange rate retreats and falls back below 1.1833, and 1.1860 fails to become effective support, it would signal the end of the "upper band" run, and price would revert to the inner band's mean. First, we would observe whether the intraday retracement at 1.1780 provides a buffer. If it breaks below, the middle Bollinger band at 1.1699 would become a more critical dividing line between bulls and bears. Further weakness would suggest 1.1565 as structural support, and a break below would trigger a retest of the lows around 1.1391. This scenario would likely be triggered by an inverse data-policy dynamic: renewed resilience in US employment or inflation, and a further hawkish Fed tone, which would temporarily restore the dollar's safe-haven and interest rate differential properties.
Fundamentals:
The Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 4.00%-4.25%. The dot plot indicates a "risk-management" easing path for the year, with two more rate cuts expected in 2025 and one in 2026. However, significant disagreement among members has heightened uncertainty about the ultimate path. After the meeting, Jerome Powell emphasized the "risk-management" nature of the rate cuts, warning that inflation will remain volatile for the remainder of the year and into 2026, and that he is "in no rush" to cut further. This statement provided a short-term boost to the dollar's nominal and real interest rate differential, but did not reverse the downward trend that had been underway since the evening session.
Looking ahead to recent data, tonight's US initial jobless claims and the Philadelphia Fed manufacturing index will provide marginal clues for the US dollar. Barring any significant surprises, the market's pricing in a combination of "slowing growth and moderate inflation" is likely to persist, thus limiting the dollar's potential for a rebound. The latest macroeconomic data also supports this narrative: US retail sales rose by 0.6% month-over-month and 5.0% year-over-year in August, both exceeding market expectations of +0.2% and +4.1%. July's data was revised upward to +0.6% month-over-month and +4.1% year-over-year, demonstrating continued consumer resilience. However, this does not alter the broader context of marginally weakening labor markets. The Federal Reserve's economic forecasts indicate that GDP growth is revised upwards to 1.6% this year and 1.8% next year; PCE is projected to reach 3.0% by year-end, moderating to 2.6% by 2026, higher than the June forecast; and the unemployment rate remains unchanged at 4.5% by year-end, falling slightly to 4.4% in 2026. Divergence on interest rate paths is widening: the most hawkish scenario points to around 4.4% by the end of the year, while the lowest scenario (interpreted by the market as the preference of new member Stephen Miran) points to 2.9%, which also reduces the reference value of the "median" itself.
On the euro front, ECB Vice President Luis de Guindos described the current monetary policy as "appropriate," allowing for small deviations from the inflation target. Economic growth is expected to remain sluggish in the second half of the year, but risks are "more balanced." Meanwhile, the Eurozone's High Consumer Price Index (HICP) rose by 0.1% month-over-month and 2.0% year-over-year in August, both below expectations (+0.2% and +2.1%). Core inflation rose by 0.3% month-over-month and 3.1% year-over-year, unchanged from July. This combination suggests that declining inflationary pressures are maintaining room for easing, but the combination of "not overly dovish" policy communication and a rebound in risk appetite is more likely to support the exchange rate in the short term than to suppress it. Taken together, the dollar's temporary correction and the narrative of the euro's fundamentals shifting from neutral to slightly warmer are pushing EUR/USD back into a volatile, positive pattern above 1.1830.
Technical aspects:
Looking at the daily chart, the middle Bollinger Band is currently at 1.1699, the upper Bollinger Band is at 1.1833, and the lower Bollinger Band is at 1.1565. The exchange rate has crossed the upper Bollinger Band and is trading sideways above it on a shrinking volume, forming a short-term "moving higher along the upper Bollinger Band" pattern, indicating a continuation of the upward trend and a simultaneous increase in volatility.
At the indicator level, MACD shows DIFF=0.0044, DEA=0.0030, and the histogram is about +0.0030. The "golden cross" above the zero axis continues, but the column has not yet expanded significantly, and the momentum has improved but not overheated; RSI (14) is near 61.45, which is in the bullish market sentiment band of 50-70 and has not yet reached the overbought threshold.
Combining the candlestick's real body and upper shadow, the current pattern suggests a pullback followed by consolidation after a breakout. A pullback to the upper Bollinger Bands of 1.1833 and 1.1860 would signal a reversal of resistance-turned-support and support-turned-resistance patterns. A dip back within the band would provide initial support at the middle Bollinger Band of 1.1699, with further support below at 1.1565 and the previous low of 1.1391. Overall, the trend remains in an upward trajectory, but caution is advised in the short term regarding the potential for false breakouts and true pullbacks.
Market outlook:
Upside Scenario (Bull Trend): If the exchange rate remains above the upper Bollinger Band of 1.1833 and demonstrates volume-led activity in backtesting, it could retest the 1.1918 high. Weak US initial jobless claims, a weakening Philadelphia Fed, and continued cooling in monthly inflation and wage growth could limit the dollar's potential for a temporary rebound, potentially leaving the euro/dollar market open for a sustained "slow bull run" along the upper band. Strategically, monitor the typical "trend-retracement-upward" pattern along the upper band, avoiding chasing higher prices when indicators approach overbought territory to avoid short-term squeezes.
Downside Scenario (Bearish): If the exchange rate retreats and falls back below 1.1833, and 1.1860 fails to become effective support, it would signal the end of the "upper band" run, and price would revert to the inner band's mean. First, we would observe whether the intraday retracement at 1.1780 provides a buffer. If it breaks below, the middle Bollinger band at 1.1699 would become a more critical dividing line between bulls and bears. Further weakness would suggest 1.1565 as structural support, and a break below would trigger a retest of the lows around 1.1391. This scenario would likely be triggered by an inverse data-policy dynamic: renewed resilience in US employment or inflation, and a further hawkish Fed tone, which would temporarily restore the dollar's safe-haven and interest rate differential properties.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
