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  • EUR/USD has popped and dropped on the FOMC statement.
  • Federal Reserve holds interest rates in 2.25%-2.50% range, as expected.
  • EUR/USD is currently trading at 1.1250 between 1.1232/58 range post Fed.

The Fed was more dovish at the last meeting and markets were  expecting only minor mark-to-market changes to the official policy statement. That is what we got and we will now wait for the presser.  

  • Fed press conference: Jerome Powell speech live stream – May 1

The FOMC previous statement

Here is the new statement which remains basically consistent with the Fed’s script:

Information received since the Federal Open Market Committee met in March indicates that the labor market remains strong and that  economic activity rose at a solid rate.  Job gains have been solid,  on average, in recent months, and the unemployment rate has remained low. Growth of  household spending and business fixed investment slowed  in the first quarter. On a 12-month basis,  overall inflation and inflation for items other than food and energy have declined and are running below 2 percent. On balance, market-based measures of  inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed.

EUR/USD background funda

While the U.S. dollar has taken centre stage today, considering the ISM data that nailed down the coffin for the greenback following yesterday’s Chicago PMIs and benign PCE data at the start of the week, as well as today’s  Atlanta Fed GDPNow estimate for 2Q growth that dipped  to 1.2% from 1.3% on April 29th, it is important not to take the eye off the ball with respect to the euro and the EZ economy.   The euro may have found some much-needed reprieve from yesterday’s stronger than expected results in the Eurozone Q1 GDP and German CPI. This will have taken the pressure off the   ECB where traders had been getting short of the euro expecting a rush to ease from the ECB. The next risks to watch for will be  the US labour market and traders should look for signs for the prospect of potential inflation down the line in the detail of the report.  

EUR/USD levels

EUR/USD was through the 38.2% Fibo of the late March swing highs to recent swing lows around 1.1240 ahead of the Fed with some margin to go until testing the trendline resistance. It rallied up to the resistance and has since settled back to where it started.  

Analysts at Commerzbank argued that the new low has not been confirmed by the daily RSI and has bounced to the 20-day ma, suggesting that while camped around this territory, the market remains directly offered and above will suggest further short covering:

 “Be advised that the pattern being traced out is a potential large reversal pattern, we have divergence of the weekly RSI and a 13 count on the weekly chart as well and there is a risk of reversal. Support at 1.1110 is regarded as the break down point to 2018-2019 support line (connects the lows).”