- Federal Reserve raised rates as expected, but the end of the cycle is near.
- DXY tumbles after Fed meeting, then recovers; Euro outperforms.
- EUR/USD rises for fifth consecutive day, post highest daily close since February 2.
On Fed’s monetary decision day, the EUR/USD reached levels above 1.0900 and then pulled back. The pair continues to move with a bullish tone, but some exhaustion signs emerged amid a US dollar recovery. Volatile market conditions are still in place and there is more to come with more central banks decisions on Thursday and PMIs on Friday.
European Central Bank (ECB) President, Christine Lagarde, mentioned early on Wednesday that underlying inflation dynamics remain strong and that they are neither committed to raise interest rates further nor finished with hiking. Governing Council member, Pierre Wunsch, argued that if markets stabilize, they have to do more. Fellow member Ignazio Visco warned that credit growth in Europe has slowed, adding the important issue now is to avoid a credit crunch. Overall, if the outlook improves, more rate hikes seem likely. European yields moved to the upside after the comments, supporting the Euro that outperformed on Wednesday.
As expected, the Federal Reserve raised its interest rate by 25 bps at the March meeting. The statement signaled that the end of the current tightening cycle is near. In the projections, the median 2023 rate is seen between 5.00% and 5.25%, suggesting just one more hike before a pause. Initially, markets cheered the decision and the statement, but later some comments from US Treasury Secretary Yellen weighed on stocks. Thereafter, the US Dollar recovered some momentum, ending the day far from the bottom and with positive momentum.
On Thursday, markets will continue to digest the FOMC meeting decisions. In addition, the Swiss National Bank (SNB) and the Bank of England (BoE) will announce their decisions, with both expecting to raise rates by 50 bps and 25 bps, respectively. Those decisions could impact the FX board. In the US, economic data to be released includes the weekly Jobless Claims, February Chicago Fed National Activity Index and February New Home Sales.
EUR/USD short-term technical outlook
The EUR/USD rose for the fifth consecutive day. The daily chart shows a clear bullish bias but some exhaustion signs suggest some consolidation before the next leg higher, unless a sell-off of the US Dollar sends the pair back above 1.0900. The mentioned level is a critical area that should limit the upside for the moment. On Wednesday, EUR/USD broke decisively above the 1.0800 area. It peaked at 1.0911, 400 pips above last week’s low. After such a rally, some consolidation is on the table.
Ahead of the Asian session, EUR/USD is retreating and it could continue to do so as the RSI in the 4-hour chart turns to the downside at overbought levels. The immediate support stands around 1.0845, and then comes the 1.0800 area. A slide below 1.0800 would weaken the outlook for the Euro.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
GBP/USD rebounds above 1.2950 after BoE policy announcements
GBP/USD trades in positive territory above 1.2950 on Thursday. The Bank of England (BoE) lowered the policy rate by 25 basis points as expected but the upward revision to inflation projections helped the pair edge higher. Market focus now shifts to the Fed's policy decisions.
EUR/USD extends recovery toward 1.0800 as USD retreats ahead of Fed
EUR/USD continues to push higher toward 1.0800 on Thursday. The pair finds support from a broad US Dollar retreat, as traders unwind their Trump win-inspired USD longs ahead of the Federal Reserve's highly-anticipated policy announcements.
Gold recovers above $2,670, awaits Fed rate decision
Gold recovers following Wednesday's sharp decline and trades above $2,670. The benchmark 10-year US Treasury bond yield edges lower after Trump-inspired upsurge, allowing XAU/USD to hold its ground ahead of the Fed policy decisions.
Federal Reserve expected to deliver 25 bps interest-rate cut, shrugging off Trump victory
The Federal Reserve is widely expected to lower the policy rate after Donald Trump won the US presidential election. Fed Chairman Powell’s remarks could provide important clues about the rate outlook.
Outlook for the markets under Trump 2.0
On November 5, the United States held presidential elections. Republican and former president Donald Trump won the elections surprisingly clearly. The Electoral College, which in fact elects the president, will meet on December 17, while the inauguration is scheduled for January 20, 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.