The Euro barely managed to eke out gains versus the greenback on Monday, and while the markets have been focused on the potential for a rate cut by the Federal Reserve on Tuesday, the outlook for European Central Bank interest rates is not necessarily euro bullish.
In fact, Credit Suisse overnight index swaps are pricing in over 50bps worth of rate cuts by the ECB over the next 12 months, compared to 42bps on Friday. However, from a technical perspective, EUR/USD has managed to hold above intraday trendline support at 1.41 and the 61.8% fib of 1.3880 - 1.4484 at 1.4111. [B]Realistically, the Fed’s rate decision and policy statement will be the key determinants of where EUR/USD goes next, and given my outlook for a dovish result, my bias for the euro this week is bullish.[/B]
[B]Related article: [/B]Euro Interest Rate Forecast
[B] Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.[/B]