Price for currency pair EUR/USD they moved positive yesterday, with gains reaching the 1.0865 resistance level before settling around 1.0810 at the time of writing. Euro pairs await the announcement of the European Central Bank’s monetary policy update today, amid expectations of a hike.
Earlier, the US dollar was sold off when the Federal Reserve announced its decision to keep US interest rates unchanged at 5.25%, but the US currency managed to claw back losses as they shared plans to continue tightening once inflation picks up again. Meanwhile, the euro can hold on to its gains as the European Central Bank remains strong on a narrow path. The central bank raised interest rates as expected in its latest policy decision, signaling room for further increases.
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There is no major news from the Eurozone and the US economy for the rest of the week, so investors may hold off until PMI numbers are released later next week. Until then, risk appetite may be the main driver of euro price movements against the dollar.
Yesterday, the Fed said it would leave the US benchmark interest rate unchanged at 5-5.25% as expected, but further increases are necessary. At the same time, the FOMC’s projections of future interest rates — known as the dot chart — showed that policymakers believe they will need to raise rates by another 50 basis points by the end of the year.
This could be seen as a surprise political event as markets were looking for a complete end to the cycle or a potential recovery of no more than 25 basis points.
However, Fed Chairman Jerome Powell said in his remarks to the media that the path to the 2.0% inflation target still has some way to go, suggesting that this is not necessarily the end of the road for the rate hike cycle. Almost all policymakers believed some additional increases this year were “appropriate,” Powell added. And that’s a clear decline in market prices to be able to start cutting rates right after the end of the year and certainly into 2024; It’s a communication the Fed believes is necessary to ensure credit conditions don’t loosen and fuel inflationary pressures.
- EUR/USD has broken above a consolidating rising wedge pattern on the hourly chart, indicating that a sharp impulse is on the way.
- Price returns to previous resistance, which can hold as support.
- This is in line with the 50% to 61.8% Fibonacci retracement levels around 1.0805 to 1.0820.
- If this is enough to keep losses in check, EUR/USD may climb back to the highs of 1.0865 or higher.
The 100 SMA is above the 200 SMA, indicating that a bullish reversal has occurred but lacks momentum or that the rally is gaining momentum rather than a reversal. 100 SMA is aligned with a wedge pad to increase its strength as flooring. Stochastic is currently heading lower and has little room to slip before returning to oversold levels. A move to the upside means that buyers are willing to come back and keep EUR/USD up.
The RSI has more room to cover before it hits oversold territory to indicate exhaustion among sellers, so pullbacks may continue to occur.
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