EUR/USD climbs after Fed reaffirms policy outlook, QT taper on the cards
|- EUR/USD bumped higher after Fed acknowledged easing inflation pressures.
- Rate markets still see November as a likely first rate cut.
- US NFP Friday to provide key labor figures.
EUR/USD bumped slightly higher after the Federal Reserve (Fed) released its latest rate outlook, with the US central bank citing an improvement in inflationary conditions, though targets remain unhit and progress has slowed. The US Dollar (USD) eased broadly and risk appetite is taking a cautious step forward.
Read more: Fed leaves policy rate unchanged as forecast, focus shifts to Powell presser
Fed Chair Jerome Powell noted that the Fed's current policy is restrictive and weighing on demand. However, the Fed is still holding back on rate cuts until sufficient evidence has been collected that rate policy needs to be changed. Fed Chair Powell tipped his hat towards labor markets and the importance of jobs figures to ascertain the inflation outlook for the US, adding additional weight to this Friday's upcoming US Nonfarm Payrolls (NFP) report. Recent data has seen betrter-than-expected perforamnce, but ongoing revisions are complicating the labor outlook for investors.'
Powell speech: Unlikely that next policy rate move would be a hike
The Fed will also be tapering the pace of balance sheet reduction to 25 billion per month of Treasury redemptions beginning June 1, down from the current 60 billion per month.
EUR/USD technical outlook
EUR/USD found some early bidding post-Fed monetary policy report, breaking above 1.0700 as the pair springboards off intraday technical support from the 200-period Exponential Moving Average (EMA) near 1.0675 on five-minute charts.
The pair madea clean break of the 200-hour EMA at 1.0695, and a heavy supply zone is priced in above 1.0730 after last week's peak near 1.0750.
EUR/USD five-minute chart
EUR/USD hourly chart
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