EUR/USD Q4 2024 Market Outlook: Key Resistance Levels and Federal Reserve Rate Cuts
As we approach the fourth quarter of 2024, the EUR/USD currency pair is experiencing significant movements in the market, driven by recent Federal Reserve actions and economic projections. The Euro has surged over 4.5% against the US Dollar in the third quarter, primarily due to the Federal Reserve's initiation of a rate-cutting cycle.
In September, the Federal Reserve made its first interest rate cut since the onset of the Covid pandemic in March 2020, reducing rates by 50 basis points. This decision was influenced by growing concerns regarding labor market strains and the potential long-term effects of high borrowing costs. The latest Summary of Economic Projections from the Federal Open Market Committee (FOMC) indicates expectations for slightly slower growth in 2024, with rising unemployment and easing inflation. Chair Powell's remarks about a "recalibration" of policy have further fueled speculation about additional rate cuts, resulting in the US Dollar Index dropping to its lowest levels this year.
Currently, markets are pricing in a 75% probability that the Fed will implement another 75 basis points cut before the year concludes. This creates a 25-basis point gap between the Fed's projections and market expectations, leaving room for the US Dollar to potentially regain strength. With two remaining interest rate decisions from both the FOMC and the European Central Bank (ECB), the question remains whether the US Dollar can stabilize as the year ends. The technical outlook for the Euro suggests a critical moment is approaching, with bulls facing their first significant test at the start of Q4.
The Euro is currently trading within an ascending pitchfork formation that has extended from the 2022 low, with the 25% parallel providing support for the past two years. Traders are focusing on major resistance levels just above, with a breakout above the 2008 trendline necessary to indicate a more substantial low and a potential trend reversal.
Key resistance levels to watch include the 61.8% retracement of the 2021 decline at 1.1275 and the 61.8% extension of the 2022 advance at 1.1523. Notably, the median line converges on this threshold as we approach year-end, representing a critical area for potential price exhaustion or inflection. A weekly close above this level would be essential to propel the Euro towards initial targets at the 78.6% retracement level of 1.1747 and the Fibonacci confluence around the 1.20 mark.
A closer examination of the weekly chart reveals that EUR/USD has broken out of a year-long consolidation pattern, with the August breach clearing the objective 2024 opening range. This technical development suggests a risk of a Q4 exhaustion high, emphasizing the importance of the upcoming test of multi-year resistance.
Initial support is found at the objective yearly open and December high-week close at 1.1038, closely followed by the January high-week close at 1.0942. This level aligns with multi-month channel support as we enter October, and any losses must be contained within this range for the June uptrend to remain intact. Broader bullish invalidation is set at the 52-week moving average, currently around 1.0836, with a weekly close below the yearly low close at 1.0641/77 needed for bears to take control.
In conclusion, the breakout from the yearly opening range in EUR/USD is nearing major resistance at a multi-year downtrend. The focus for the Q4 open is on how the market reacts to this zone if reached. From a trading perspective, losses should be limited to 1.0942 if a breakout is imminent, with a close above 1.1275 required to initiate the next upward movement. Historical seasonal trends since the 2008 high in EUR/USD slightly favor bullish movements, with Q4 average gains reaching 3.9%, despite an average performance of just +0.17%. December shows even better seasonal tendencies, averaging +1.1%. This suggests potential corrective action off resistance early in the quarter, leading to a rebound off support as we approach the yearly close. All eyes are now on the response at multi-year technical resistance levels.