EUR/USD Rises Through 1.0200 As Fed Hikes Rate By 75 Bps
The EUR/USD pair advanced above the 1.0200 level after the Fed announced a 75 bps rate hike as widely expected. However, it seems that Jerome Powell’s cautious comments regarding future meetings disappointed some investors and weighed on the U.S. dollar.
At the time of writing, the shared currency trades at the 1.0205 zone, recording a 0.9% daily gain, having hit a session high of 1.0212 after the announcement. The DXY took a big hit and fell below 106.35, losing 0.7% on the day.
The Federal Reserve Chairman, Jerome Powell, admitted during the press conference that the economic activity is slowing down and that the housing sector has weakened due to higher mortgage rates. Nevertheless, Powell and Co. don’t consider that the U.S. economy is in a recession as some sectors are “doing too well”, like the labor market. In that sense, Fed Chair considered that a slowdown of the economy is necessary for the supply to catch up with the demand.
He clarified that ongoing rate increases are appropriate for the following meetings but that the pace will be data-dependent and decided meeting by meeting. For the September meeting, Powell said that the FOMC wouldn’t hesitate to take an “unusual higher increase” if inflation doesn’t show compelling evidence that it is slowing down.
The WIRP tool suggests that markets are pricing a 64.4% probability of a 50 bps hike and lower odds of 32.2% of a 75 bps increase at the Fed’s next meeting.
From a technical perspective, the EUR/USD short-term outlook remains tilted to the downside, according to indicators in the daily chart, while the price continues to develop within a descending channel.
The RSI holds a positive slope but is still below its midline, while the MACD printed a higher green bar, indicating a growing buying interest.
To extend the recovery, the EUR/USD must secure the 20-day SMA, currently at 1.0193. In that case, the bulls may gather enough momentum to advance to the 1.0300 and 1.0350 levels.
On the other hand, loss of the 1.0100 support area would expose the 1.0000 level and the cycle low of 0.9952.
At the time of writing, the shared currency trades at the 1.0205 zone, recording a 0.9% daily gain, having hit a session high of 1.0212 after the announcement. The DXY took a big hit and fell below 106.35, losing 0.7% on the day.
The Federal Reserve Chairman, Jerome Powell, admitted during the press conference that the economic activity is slowing down and that the housing sector has weakened due to higher mortgage rates. Nevertheless, Powell and Co. don’t consider that the U.S. economy is in a recession as some sectors are “doing too well”, like the labor market. In that sense, Fed Chair considered that a slowdown of the economy is necessary for the supply to catch up with the demand.
He clarified that ongoing rate increases are appropriate for the following meetings but that the pace will be data-dependent and decided meeting by meeting. For the September meeting, Powell said that the FOMC wouldn’t hesitate to take an “unusual higher increase” if inflation doesn’t show compelling evidence that it is slowing down.
The WIRP tool suggests that markets are pricing a 64.4% probability of a 50 bps hike and lower odds of 32.2% of a 75 bps increase at the Fed’s next meeting.
From a technical perspective, the EUR/USD short-term outlook remains tilted to the downside, according to indicators in the daily chart, while the price continues to develop within a descending channel.
The RSI holds a positive slope but is still below its midline, while the MACD printed a higher green bar, indicating a growing buying interest.
To extend the recovery, the EUR/USD must secure the 20-day SMA, currently at 1.0193. In that case, the bulls may gather enough momentum to advance to the 1.0300 and 1.0350 levels.
On the other hand, loss of the 1.0100 support area would expose the 1.0000 level and the cycle low of 0.9952.
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