- US dollar jumps after the FOMC meeting as officials bring forward rate hike expectations.
- EUR/USD heads for lowest daily close since early May.
The EUR/USD dropped further and reached a fresh monthly low at 1.2007 during Fed’s Powell press conference. The pair dropped sharply following the FOMC meeting and continued to slide amid a rally of the US dollar.
The greenback rose sharply amid higher US yields. The 10-year yield jumped to 1.59% before pulling back to 1.56% (still up more than 4% for the day). At the same, equity prices dropped further in Wall Street.
The FOMC projections triggered the move. The Federal Reserve, as expected kept interest rates and the QE program unchanged. The economic projections of FOMC members now see higher inflation ahead, and also more members expect a rate hike in 2023, compared to the March report.
“Fed policymakers likely will signal in late summer or early August that tapering is nearing. Long-term interest rates likely will grind higher as market expectations of tapering ramp up”, say analysts at Wells Fargo. The minutes of the June meeting will be released on July 7.
EUR/USD approaches key support: 1.1990
The EUR/USD found support so far above the 1.2000 area. The rebound so far has been limited quickly by the 1.2035 area, showing that the bearish pressure still persists. The key support to consider ahead is 1.1990, a horizontal level and also the 200-day moving average.
Price is back under the 55-day moving average, and the technical outlook now favors the downside. A recovery above 1.2200 would negate the bearish bias.