The EUR/USD pair is gaining upside momentum as renewed U.S. dollar weakness follows Federal Reserve Chair Jerome Powell’s dovish comments earlier this week. Powell’s acknowledgment of rising downside risks to employment has reinforced expectations of another Fed rate cut later this month, providing support for the euro while keeping traders alert to near-term price action
Dovish Powell Halts USD Rebound
EUR/USD has rallied sharply over the past two sessions after Powell’s remarks at the National Association for Business Economics (NABE) event signaled a more cautious policy stance. Powell indicated that the U.S. labor market is softening faster than anticipated, suggesting the Fed may deliver additional monetary easing to prevent a broader slowdown.
“While the unemployment rate remained low through August, payroll gains have slowed sharply, likely in part due to lower immigration and labor force participation,” Powell said. “In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen.”
His remarks pushed short-dated Treasury yields to multi-month lows, with the two-year yield dropping to levels not seen since May. While near-term Fed funds rate expectations remain unchanged, markets are pricing in nearly a 100% probability of a 25-basis-point rate cut at the October FOMC meeting.
The U.S. dollar index (DXY) weakened following the speech, sending EUR/USD higher despite ongoing weakness in eurozone macro data. The move reflects a broader market theme: as the Fed edges toward easing, investors are rebalancing positions across forex, indices trading, and even crypto investment sectors that benefit from a weaker dollar and higher liquidity.
Technical Analysis: Trend Break Opens Bullish Scenarios
On the daily chart, EUR/USD has broken above a descending trendline from the September 17 high, now testing resistance near 1.1650. The move came after buyers successfully defended the October 9 low of 1.1544, suggesting strong demand below that level.
Momentum indicators remain neutral both the 14-day RSI and MACD show diminishing bearish pressure but no clear bullish confirmation. Traders are therefore focusing on price action to determine the next move.
If EUR/USD closes decisively above 1.1650, it could open a pathway toward the 50-day moving average, often a key pivot level in forex trading strategies. Beyond that, bulls may target the 1.1750–1.1800 zone, where sellers capped gains last month.
Conversely, a failure to sustain momentum above resistance could invite short positions targeting the double-bottom at 1.1544, with stops placed tightly above 1.1650 for risk control a hallmark of disciplined forex trading.
Market Sentiment: Yield Curve, Fed Outlook, and the Euro
While the EUR/USD correlation with U.S. yields has been inconsistent, Powell’s dovish shift clearly undermined the dollar. The pause in quantitative tightening (QT) also hinted at by Powell could inject further liquidity into markets, lowering real yields and sustaining the euro’s bid.
For indices traders, a softer dollar and easier monetary policy often translate into higher equity valuations. Major U.S. indices such as the S&P 500 and Nasdaq Composite advanced on expectations of a more accommodative Fed stance.
Meanwhile, in the crypto market, sentiment turned upbeat following Powell’s speech, with Bitcoin and Ethereum both extending their rallies. Investors interpreted the signal of potential rate cuts and a halt to QT as positive for digital assets, reinforcing the link between monetary policy easing and crypto investment flows.
Event Risk: ECB Speeches and Light U.S. Data Calendar
The European Central Bank (ECB) calendar features multiple speakers, including President Christine Lagarde, whose tone could influence short-term euro sentiment. The final read of September inflation is expected to confirm prior estimates and is unlikely to surprise.
On the U.S. side, the ongoing government shutdown continues to disrupt major data releases, including the nonfarm payrolls report. That means Fed speakers will remain the primary source of direction for traders.
With macro catalysts limited, markets will focus heavily on price action dynamics, U.S. yield spreads, and potential policy hints from both the Fed and the ECB in the coming days.
EUR/USD Outlook Summary
- Bias: Mildly bullish above 1.1650, neutral below.
- Resistance levels: 1.1650, 1.1750, 1.1800
- Support levels: 1.1600, 1.1544, 1.1500
- Momentum: RSI neutral, MACD flattening
- Key catalyst: Fed rate expectations and ECB commentary
EUR/USD is poised for a potentially pivotal move. With the Fed signaling caution and Powell emphasizing employment risks, U.S. dollar softness could persist into late October. Traders are watching for a breakout confirmation above 1.1650 a move that could set the tone for both forex trading strategies and indices trading in the days ahead.
Meanwhile, global risk sentiment spanning equities, bonds, and the crypto market remains tethered to the evolving path of U.S. monetary policy. For investors diversifying between forex, indices, and crypto investment, Powell’s dovish pivot could define Q4’s trading landscape.
