Home Forex EURUSD in the middle of a storm!

EURUSD in the middle of a storm!

by SuperiorInvest

Last night, Federal Reserve Chairman Jerome Powell delivered a clear message: “We have to put inflation behind us,” “but there is no painless way to do it.”

With these remarks, Powell emphasized the Fed’s priority goal, which is and will remain to regulate inflation. The American central bank raised interest rates for the third time in a row, this time by 75 bp.

By the end of the year, new projections raise the target policy rate to 4.25% to 4.50%, the highest level since 2008, to end between 4.50% to 4.75% in 2023.

At a press conference after the Fed unanimously decided to raise interest rates to 3.00% to 3.25%, Powell said. that the Fed will maintain a restrictive policy for some time. In order for inflation to decrease, two things will have to happen. causing sub-trend growth and softening in the labor market. When it comes to knowing when to slow or stop hikes, the FOMC will be looking at several things: including below-trend growth, a better balance in the labor market, and clear evidence that inflation is falling toward the 2% mark.. The Fed is very aware of how long it will take for financial conditions to work their way through the economy and lower prices. It is difficult to predict how this will all develop, but it is assumed that there will be a point when it will be appropriate to slow down the pace of the hikes and take stock. He added that the Fed is at the “low end of what is restrictive.” The chances of a soft landing diminish as policy becomes more restrictive or has to remain restrictive longer.

The safe-haven dollar responded by rising more than 1% yesterday. It thus reached the highest level in the last 20 years and strengthened by more than 16% since the beginning of the year. (see below)

On Wednesday, the EURUSD suffered two consecutive waves that strongly shook its rate. The first was because of Russian President Vladimir Putin, who chose to escalate his war against Ukraine by announcing the enlistment of more than 300,000 reservists, before going further to issue a thinly veiled nuclear threat by declaring: “ready to use any means necessary.” The effect on EURUSD was immediate with the day at 0.9885, the lowest in two weeks, against around 0.9960 earlier in the day.

The second wave took place after Jerome Powell’s press conference; although initially the price tried to bounce back towards the $0.99 level, sellers quickly gained control so that the Eurodollar ended the day at around $0.9812.

Technical analysis

Technically, the price is currently at 0.984 below the Kijun (green line) and the Chikou range (yellow line). The Lagging Span is below the Ichimoku components and price action which clearly shows bearish momentum and could reach its support at 0.96. In the case of a bullish reversal, the main resistance (Kijun) is at parity ($1). (see above)

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Kader Djellouli

Market analyst

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