EUR/USD: Indecisive market, USD vulnerable to dovish Fed expectations

  • Back-to-back Doji candles on the daily chart indicate the EUR/USD market has turned indecisive.
  • The rising Fed easing expectations make the US Dollar vulnerable.
  • EUR/USD needs to break above 1.1250 to revive the corrective rally.
EUR/USD's corrective bounce from recent lows near 1.1027 has stalled with technical charts reporting signs of indecision in the market place.

Notably, the pair created a Doji candle for the second straight day on Wednesday. A Doji occurs when the market sees the two-way business before closing the period on a flat note.

Hence, that candlestick pattern is considered a sign of indecisive market.

Upside favored on rising dovish Fed expectations
The American Dollar is vulnerable to rising expectations of aggressive easing by the US Federal Reserve by the year-end.

"US rate markets are currently discounting almost three 25 basis point rate cuts before year-end and a 1.0% terminal cash rate. That USD vulnerable against the safe havens and the Euro," according to Citi Research.

So, the EUR/USD pair could resume the corrective bounce with a convincing move above 1.1250 (Doji candle's high).

The outlook, however, would turn bearish if the spot drops below 1.1167 (Doji candle's low). A bearish close, if confirmed, would shift risk in favor of a drop to 1.10.

The EUR may come under pressure if the European Central Bank's (ECB) Economic Bulletin, scheduled for release at 08:00 GMT, paints a negative picture of the Eurozone economy, boosting recession fears and forcing markets to shift focus from rising dovish Fed expectations to prospects of aggressive easing by the ECB.