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  • EUR/USD has been pulling back from highs in the 1.1910s and has now fallen back to close to 1.1875.
  • FOMC minutes and comments from Biden on infrastructure have not been able to inject any direction into the market.

EUR/USD has been pulling back from highs in the 1.1910s in recent hours and as the US session draws to a close, has now fallen back to close to 1.1875, slightly below its 200-day moving average at 1.1880. That means the pair has now eroded its gains on the day and trades flat and short-term bears will now be looking for a move back to the 21-day moving average just above 1.1850. Longer-term bears may hope that a clean break below the 200DMA means a move back to recent lows just above 1.1700 is next.

Driving the day

The main event of the day was the release of the minutes of the March FOMC meeting; the minutes did not contain any surprises and, thus, do not seem to have had much of an impact on FX market price action. US President Joe Biden has also been speaking over the last hour or so; he noted that the Democrats and Republicans will be meeting in the coming weeks to talk infrastructure (as a reminder, he wants to pass the stimulus bill by summer) and reiterated that he is not planning on raising taxes on anyone making less than $400K per year and that he is open to alternative proposals regarding his plans to increase US corporation tax to 28%. As has was the case with the FOMC minutes, there was nothing new from Biden, or not anything that would move FX markets.

FOMC Minutes Recap

The Fed recently released the minutes of the 16-17 March FOMC meeting. Unsurprisingly, FOMC policymakers agreed that despite an improving economy, the US remains a long way from the Fed’s goals, with participants also noting that it would likely be “some time” before “substantial further progress” was seen towards its goals – this latter point can be interpreted as FOMC policymakers agreeing that it will likely be some time before they start tapering the bank’s asset purchases programme, given the forward guidance given for this states that asset purchases will continue at the current rate until “substantial progress” is made towards the Fed’s goals. FOMC participants agreed that the path ahead remains highly uncertain given the risks posed by the pandemic and, given those risks, the Fed’s current stance is appropriate

The minutes said that a number of FOMC participants highlighted the importance of communicating progress well in advance of any potential QE taper, the timing of which will depend on the economy and pace of recovery. Various participants, according to the minutes, noted that changes in the policy path should be based on economic outcomes rather than economic forecasts – this is unsurprising, with Fed Chair Jerome Powell insisting that the Fed wants to actually see inflation sustainably above 2.0% and full employment before it even starts thinking about tightening policy.