The EURUSD currency pair is showing growth due to weakening of the dollar and falling yields of the U.S. government treasury bonds under the influence of dovish comments from the Federal Reserve System (Fed) representatives.
The two-year U.S. government treasury yield fell to a one-month low of 4.9260% on Tuesday, reflecting near-term rate expectations. Its last percentage value was at 4.9675%.
Some members of the Federal Reserve in recent days have signaled that the U.S. regulator may not need to tighten the monetary policy as it was initially thought.
According to Macquarie's global FX and interest rates strategist Thierry Wizman, The Fed is shifting away from further rate hikes. In addition, it may revise its tight policy by December.
Traders' attention is now focused on the minutes of the Fed's September meeting, which will be released today. These documents may provide further clues on interest rate outlooks. U.S. inflation data is expected the next day.
In addition, information about the European Central Bank's (ECB) monetary policy meeting will be released on Thursday. The regulator will publish a monetary policy report that will provide investors with a detailed view of economic conditions that influenced the interest rate decision. The report will also provide forecast data on inflation indicators and consider the outlook for economic growth.
ECB President Christine Lagarde is confident that the strategy will help reach the inflation target. She highlighted this in an interview with the La Tribune Dimanche newspaper. The head of the European Bank said that they aim to reduce inflation to 2% and will do everything possible to achieve this goal.
In September, the central bank raised the interest rate for the tenth consecutive time, bringing it to a record 4.5%.
The EURUSD quotes are forming a downtrend on the H4 timeframe.
The MACD indicator (standard values) has moved into the positive volume zone, indicating divergence. This implies that buyers have enough strength to go beyond the downtrend.
The short-term outlook for EURUSD is to buy.
The target is at the level of 1.0770.
Part of the profit should be fixed near the level of 1.0670.
A Stop loss should be placed at the level of 1.0470.
The bullish trend is of a short-term nature, so it is recommended to limit the trading volume to no more than 2% of your capital.