Euro and Pound Remain Under Pressure

[Ben Graham]

The U.S. dollar continues to be in demand, which puts pressure on risk assets. Yesterday, San Francisco Federal Reserve Bank President Mary Daly stated that the U.S. central bank should remain open to the possibility of another interest rate cut at its next monetary policy meeting in December. However, she did not give any clear hints that rates would be lowered as previously expected.

Daly said she agreed with the Fed's decision last week to cut the base rate by a quarter of a percentage point for the second consecutive month, calling the move appropriate. The head of the San Francisco Fed also noted that the central bank is currently facing the need to balance two objectives. On one hand, it must continue to reduce inflation, which remains above the target level. On the other hand, it must support the labor market so that people can recover from the loss of purchasing power caused by the high inflation of recent years. "This really means assessing incoming data, maintaining an open mind, and making decisions that balance these risks and allow the economy to continue functioning and achieve a soft landing," Daly said.

Such rhetorical uncertainty creates shaky ground for investors. On one hand, there remains hope for further monetary policy easing, which traditionally supports risk assets. On the other, the absence of clear signals makes traders nervous and prompts them to take profits — especially amid rising U.S. bond yields. The market seems stuck waiting for clearer guidance. Upcoming inflation data, expected in the coming weeks, may provide some clarity, but until then, volatility is likely to remain elevated. Traders should probably exercise caution and avoid rash decisions, relying instead on fundamental analysis and portfolio diversification.

It is worth recalling that Fed officials who spoke after last week's rate cut expressed similar views regarding future actions. Fed Chair Jerome Powell told reporters after Wednesday's decision that another rate cut in December is not a foregone conclusion. His words led investors to lower the probability of a third consecutive quarter-point rate cut.

As for the current technical picture of EUR/USD, buyers now need to think about reclaiming the 1.1500 level. Only then will it be possible to target a test of 1.1540. From there, a move to 1.1580 could follow, but achieving this without support from major players will be quite difficult. The furthest target is the 1.1620 high. In case of a decline in the trading instrument, I expect significant buying activity only around the 1.1460 area. If no major buyers appear there, it would be wise to wait for a renewal of the 1.1430 low or consider opening long positions from 1.1400.

As for GBP/USD, pound buyers need to break through the nearest resistance at 1.3035. Only this will allow them to aim for 1.3065, above which further gains will be quite challenging. The ultimate target is the 1.3100 level. If the pair falls, the bears will try to regain control over the 1.3000 level. Should they succeed, a breakout of this range would deal a serious blow to the bulls' positions and push GBP/USD down to the 1.2965 low, with a potential move toward 1.2930.

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