17.09.202612:04 Forex Analysis & Reviews: EUR/USD – Price Analysis and Forecast: The Fed's Forecasts and Warsh's Rhetoric Were More Hawkish Than Those of the ECB and Lagarde

During early European trading on Thursday, EUR/USD is trading with little change around 1.14775. Traders continue to assess the US Federal Reserve's recent decision to raise interest rates, while US initial jobless claims data are due to be released later in the day.

On Wednesday, the Fed raised its interest rate by a quarter of a percentage point, stating that it intends to make further rate increases in the coming months.

Fed Chair Kevin Warsh supported the unanimous decision to raise rates, while Fed officials reaffirmed their commitment to a hawkish approach, forecasting one more rate hike by the end of the year. This hawkish rhetoric supported the US dollar and created obstacles to further EUR/USD gains.

"Warsh's rhetoric was more hawkish than expected, and the forecasts for future rate hikes came as a surprise to the markets. This prompted market participants to revise their rate expectations upward, ultimately strengthening the dollar," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

The European Central Bank also raised its rate by 25 basis points last week and emphasized that it would not make any advance commitments regarding further steps following its second rate hike since the beginning of the conflict in Iran. ECB President Christine Lagarde noted that inflation in the euro area would remain high for some time and acknowledged differences in market expectations regarding interest rates.

TD Securities analysts believe that the Fed "met market expectations by raising the rate by 25 basis points and providing hawkish economic projections." Nevertheless, they warn that the US dollar rally may be short-lived. The Fed's median projections do not imply any further monetary policy tightening beyond what is already priced into the market, while the Fed's ability to tighten monetary policy remains limited in the absence of new economic shocks. Sustained economic growth in other parts of the world also supports this view.

The tone of Warsh's press conference was clearly hawkish. His FXS Speechtracker score was 7.4 out of 10, above the historical average of 7 out of 10, highlighting his firmer stance on inflation. Warsh emphasized that the decision to "reduce accommodation" was related to the strengthening economy and the fact that "inflation is a serious problem." This was consistent with his statement that further policy tightening could be considered if current trends continue, supporting expectations of further hawkish action by the Fed.

The FXS Fed Sentiment Index rose by 26.07 points to 151.79, moving firmly into hawkish territory. This sharp increase confirms that the Fed's statements significantly strengthened perceptions of its restrictive policy stance, reinforcing expectations of tighter monetary policy and supporting the dollar's resilience.

From a technical perspective, EUR/USD has a bearish outlook in the near term on the daily chart, as the spot price remains below all key levels. The 100-day and 50-day simple moving averages (SMA) are above the current price, indicating continued selling pressure. The oscillators are negative, confirming an increased bearish presence in the market. Meanwhile, the Relative Strength Index (RSI) is close to the oversold zone, indicating a potential correction.

The nearest resistance level is around the round-number level of 1.1500, followed by the 100-day and 50-day simple moving averages (SMA). The pair established support at the September low around 1.1450. However, since there are no significant support zones at lower levels, a further decline could leave the pair vulnerable to a move toward new September lows.