EUR/USD: Fed meeting and panic related to Pacwest boost the Euro Dollar

Wednesday night's Fed meeting resulted in lots of volatility on the EUR/USD, for an ultimately bullish balance sheet, the currency pair having climbed up to 1.1092, and settling at 1.1085 this Thursday morning.

Recall that the Fed has decided to as widely anticipated; of a 25 basis point rate hike yesterday, while suggesting that a pause will be decided next month, although the central bank also clarified that this decision will depend on the data.

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Fed meeting and Pacwest collapse convince forex that rate hike is over

However, the probability deducted from the markets to be rate term that the Fed decides to pause at the June meeting is now over 96%, down from around 64% a week ago, and 83% the day before.

In other words, Wednesday night’s FOMC meeting reinforced the the belief that the Fed's rate hike cycle is over.

And it is all the more likely that the Fed will give up raise rates further as the worries of regional banks continue. Pacwest bank saw its shares fall by more than 50% after the market last night, following a reports from Bloomberg that the bank is considering a face-to-face sale; a deteriorated financial situation.

The fate of the EUR/USD in the hands of the ECB and the NFP by the end of the week

Turning to Thursday, EUR/USD traders’ attention will turn to the ECB, which needs to take action. its turn to make its monetary policy decision. Although analysts mostly expect to rate hike of 25 basis points, the consensus is less clear than it was for the Fed meeting last night, so a bigger hike of 50 basis points is not excluded.

Thus, a rate increase limited to 25 points might have limited impact; on EUR/USD, see the pair falling against the backdrop of « news selling after rumored buying”, while a 50% rate hike would likely send the currency pair to new yearly highs.

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Finally, we will not forget that after the ECB meeting this Thursday, traders will still have the NFP report on US job creations to hand. digest tomorrow, knowing that solid figures could make the market doubt; in its anticipation of an end to the Fed rate hike.

Technical thresholds at; monitor on EUR/USD

From a graphical point of view, it will be noted that yesterday’s rise failed. to give rise to; new yearly highs. The previous 2023 high of 1.1095 and the psychological threshold of 1.11 therefore still form immediate resistance for EUR/USD.

À On the downside, 1.10 is more pivotal than support, with first chart support at 1.09/1.0920 area. Below this threshold, the area formed by the 50- and 100-day moving averages at 1.0829 and 1.0777, where is also the long-term bullish trend line visible since the end of September 2022, will be the next important support.

Lower, we can consider that the underlying trend of the Euro Dollar returned to the downside, and 1.07 will be the first potential short target.

EUR/USD: Fed meeting and Pacwest panic boost Euro Dollar  

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