EUR/USD Analysis: Fed delivers, dollar gains
|EUR/USD Current Price: 1.1019
- The US Federal Reserve cut rates by 25 bps as expected, Powell hawkish as usual.
- European August inflation rose a modest 0.1% when compared to a month earlier.
- EUR/USD fell within familiar levels, the downside potential to increase below 1.0980.
The EUR/USD pair traded within familiar levels during the first half of this Wednesday, as the market waited for the event of the week, the US Federal Reserve monetary policy decision. The shared currency came under mild-pressure after the release of the EU August final inflation data, as it was downwardly revised monthly basis to 0.1%, below the expected 0.2%. Annual inflation was confirmed at 1.0%, although the impact was limited as the ECB has already announced a stimulus package not so far ago.
Dollar surges post-Fed
The Fed delivered as expected, cutting the federal funds rate by 25 basis points to a 1.75% - 2% range, although two voting members voted for a no-change. The dot-plot shows that there are no more rate cuts in the docket for this year, and quite a split FOMC for 2020 in that regards. Economic growth has suffered a slight upward revision, although there were no changes to inflation projections when compared to June’s forecast. The decision gave the greenback a boost, later fueled by Chief Powell’s press conference, who gave no signs of being concerned about the economy. "Inflation pressures 'clearly' remain muted," Powell said, but he still expects inflation to rise to 2.0%. He also said that is a meeting to meeting decision, and that’s there’s no preset course in monetary policy, which will remain data-dependent.
This Thursday, the EU will only release July Current Account data, while the US will publish weekly unemployment figures and the Philadelphia Fed Manufacturing Survey for September.
EUR/USD short-term technical outlook
The EUR/USD pair fell to a daily low of 1.1013, bouncing just modestly from the level ahead of Wall Street’s close, still in the red for the day. The pair has not delivered a relevant breakthrough. The pair is again trading below its 20 and 100 SMA in the 4 hours chart but needs to break below 1.0980, the 61.8% retracement of the latest daily advance to actually turn bearish. The 200 SMA has contained advances and will likely continue to do so, currently around 1.1085. Technical indicators in the mentioned chart remain neutral-to bearish, with the Momentum heading nowhere around its midline, and the RSI gaining downward traction around 45.
Support levels: 1.1045 1.0980 1.0955
Resistance levels: 1.1085 1.1120 1.1160
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