Euro's Deep Dive – Hawkish FOMC In-Play
The EUR/USD was closed at $1.1994 after placing a high of $1.2135 and a low of $1.1993. The EUR/USD currency pair fell sharply on Wednesday and reached its lowest level since May 5 amid the strong comeback in the U.S. dollar after the FOMC statement. The U.S. dollar soared on Wednesday on the back of a favorable Federal Reserve decision about its monetary policy. Federal Reserve raised inflation expectations for the year 2021 while FOMC presented a projection that Fed might hike interest rates in 2023 for two times.
The decision of the Fed to keep interest rates and the QE program unchanged came in as expected; however, the statement released by FOMC gave a little different perspective compared to the previous one. The statement did not include any mentioning of tapering the asset purchases; however, it did include an economic projection that predicted two interest rates hike in 2023. The greenback rose sharply against the basket of six major currencies and reached a 91.43 level, further supported by the rising U.S. Treasury yields. The yields on the benchmark 10-year note jumped to 1.59% before pulling back to 1.56% and helped the U.S. dollar that kept the currency pair EUR/USD under pressure for the day.
On the data front, there was no macroeconomic data to be released from the European side, however from the U.S. side, at 17:30 GMT, the Building Permits from May declined to 1.68M against the estimated 1.73M and weighed on the U.S. dollar that limited the losses in EUR/USD. The Housing Starts also dropped to 1.57M against the anticipated 1.64M and weighed on the U.S. dollar that further caped decline in EUR/USD. The Import Prices surged to 1.1% against the predicted 0.8% and supported the U.S. dollar that added extra downward pressure on EUR/USD.
Furthermore, the losses in EUR/USD pair extended after the speech of Chairman of the Federal Reserve, Jerome Powell. According to him, the revision in the projection for interest rate hikes came in after inflation accelerated faster and could be more persistent than the central bank's expectations.
On the other hand, on Wednesday, the European Union decided to add the United States to its safe travel list. It means it will be easier for an American citizen to take a vacation in any EU member state. The coronavirus pandemic had prompted a ban on non-essential travel from the U.S. and other places to avoid the contagion. However, with the increasing pace of vaccination, the 27 EU member states allowed non-essential travelers from eight new countries on Wednesday.
EURUSD Intraday Technical Levels
Pivot Point: 1.2041
EUR/USD - Technical Outlook
The EUR/USD's bearish bias has dominated the market since the release of the Hawkish FOMC statement from the U.S. FED. The EUR/USD pair is now trading at the 1.1955 level, disrupting the support level of 1.2096 and 1.2060 levels. The EUR/USD has also violated the double bottom support level of 1.1987 level on the lower side. For now, the EUR/USD's next support prevails at the 1.1940 level, and a bearish breakout of 1.1940 exposes the pair's movement further lower until the 1.1875 level. The MACD shows strong selling bias among investors, while the 50 periods EMA suggest an oversold scenario for the EUR/USD. The EUR/USD's support level of 1.1875 will be in highlights to capture bullish correction. All the best!
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