EUR/USD picks up from lows as risk appetite weighs on Dollar's recovery

• The Euro trims previous losses and returns above 1.1830 as the US Dollar recovery loses steam.
• The Fed cut rates as expected and hinted at further easing on Wednesday, with policymakers split about the rate path.
• A moderate risk appetite might hold the US Dollar's recovery on Thursday.

EUR/USD has pared previous losses on Thursday's early European session and has returned to levels beyond 1.1830 after bouncing from 1.1780. A moderate risk appetite is supporting the Euro, as the US dollar recovery seen in the aftermath of the Federal Reserve (Fed) monetary policy decision loses momentum.

The US central bank met market expectations, cutting rates by 25 basis points (bps) and signaling further rate cuts ahead to support a weakening labor market. The interest rate projections pointed to two further cuts in 2025 and another one in 2026, although policymakers were divided on the rate path.

Fed Chair Jerome Powell struck a less dovish tone during the ensuing press conference. Powell considered the decision a "risk management cut" but warned that inflation would continue growing through the rest of the year and into 2026, and reiterated that he is in no rush to cut interest rates, which provided a significant impulse to the US Dollar.

In the economic calendar today, US Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey will provide fundamental guidance. Still, excluding significant surprises, a moderate risk appetite is likely to weigh on the US Dollar’s recovery over the next sessions.

Daily digest market movers: US Dollar bounces up as Fed meets market expectations

• The Federal Reserve cut its benchmark interest rates by a quarter-point to the 4.0%-4.25% range, and the median of the dot plot anticipates two further cuts in the next two meetings, highlighting a dovish turn from June's projections.
• In the Fed's Summary of Economic Projections, US Gross Domestic Product (GDP) growth projections have been revised up to 1.6% this year and 1.8% next, from 1.4% and 1.6%. PCE inflation is expected to remain at 3% at the end of the year and ease to 2.6% in 2026, above the 2.4% forecasted in June, while the Unemployment Rate is seen at 4.5% at the end of the year, unchanged from previous projections and down to 4.4% in 2026. In June, the projection for next year was 4.5%.
• Regarding interest rates, policymakers showed a wider dissent. The median forecast projects 50 basis points of further cuts in the last quarter of the year, with the most hawkish option leaning for a 4.4% rate in December, while the lowest option, probably Trump's new appointment, Stephen Miran, showed a preference for a 2.9% rate. Such divergence puts the median forecasts into question.
• On the macroeconomic data front, Tuesday's figures showed that US Retail Sales grew 0.6% MoM and 5% YoY in August, beating expectations of a 0.2% and a 4.1% respectively. July's data was revised up to a 0.6% monthly increase from the previous 0.5% and a 4.1% yearly increment from the previous 3.9%.
• In the European morning, ECB Vice-President De Guiondos assessed that the present monetary policy is appropriate and that some small deviations from the inflation goal should be accepted. De Guindos forecasts economic growth to remain subdued in the second half of the year but said that risks are now more balanced. The Euro ticked up as De Guindos spoke.
• Data from Europe released on Wednesday showed that the Harmonized Index of Consumer Prices (HICP) grew at a 0.1% pace in August and 2% in the last 12 months, below expectations of steady inflationary pressures, at 0.2% and 2.1% respectively. Core inflation grew at a 0.3% monthly pace and 3.1% year-on-year, unchanged from July.

Technical Analysis: EUR/USD correcting lower within a bullish trend

EUR/USD is going through a bearish reversal, following a nearly 2% rally from last week's lows. The pair has given away some ground after the Fed's monetary policy decision, but the broader trend remains bullish. The 4-hour Relative Strength Index (RSI) has pulled back from overbought levels but remains above the key 50 level so far.

The 4-hour Moving Average Convergence Divergence (MACD) indicator shows a bearish cross, but Euro bears are likely to be challenged at a previous resistance area in the vicinity of 1.1780 ( September 9 and 15 highs) ahead of the intraday support level at 1.1755. Further down, trendline support from late August lows meets the September 12 low at the 1.1700 area.

To the upside, immediate resistance is Tuesday's high, at 1.1878. Beyond here, the 127.2% Fibonacci retracement level of the September 11-16 rally is at 1.1935 ahead of the 1.2000 psychological level.