Yesterday, the Federal Reserve kept interest rates steady for a third meeting and gave the clearest signal yet that its aggressive campaign of raising rates is over, while making a prediction of a series of cuts next year.
Officials decided unanimously to leave the target range for the benchmark federal funds rate at 5.25% to 5.5%, which is the highest since 2001.
While Chairman Jerome Powell said that officials are prepared to raise rates again if price pressures resume, he noted that policymakers are now focusing on when to cut rates as inflation continues to fall towards the 2% target. This statement will lead to the start of a significant and more solid weakening of the U.S. dollar, which also includes EURUSD.
Quarterly forecasts showed Fed officials expect to lower rates by 75 basis points next year, a faster pace of cuts than indicated in September. While the median expectation for the federal funds rate at the end of 2024 was 4.6 %, expectations varied widely among individuals.
Powell emphasized that these forecasts are not a predetermined plan, and acknowledged that policymakers at this week's meeting discussed when it would be appropriate to start cutting rates.
The Fed's "dot plot" showed that eight officials foresee fewer than three quarter-point rate cuts next year, while five expect more.
"There was definitely a tinge of finality in his press release," said Derek Tang, an economist with LH Meyer/Monetary Policy Analytics. "He and the whole FOMC committee saw no need to confront market suspicions of earlier and deeper easing."
From a technical point of view, this means that the way up to the level of 1.16 is open for EURUSD. And the price is likely to reach it, not earlier than in the middle of the next year.
The final recommendation is to buy EURUSD. Take profit at the level of 1.16. A stop-loss could be set at the level of 1.02