EUR/USD builds cushion above 0.9800 after a Fed-induced drop, Russian nuclear fears intensify

• EUR/USD has sensed a sigh of relief after dropping to near 0.9813.
• Extreme hawkish guidance from the Fed has demolished the shared currency bulls.
• Russian military threat to use nuclear weapons has underpinned the risk-off impulse.

The EUR/USD pair is displaying a lack of selling pressure while re-testing Wednesday’s low at 0.9813 in the Tokyo session. The asset has turned sideways which could be considered as an intraday inventory accumulation, which could ditch the downside momentum for a while. On a broader note, the major witnessed a steep fall after delivering a downside break of the consolidation formed in a 0.9950-1.0050 range.

The shared currency bulls witnessed extreme volatility on Wednesday over the monetary policy announcement by the Federal Reserve (Fed). The currency market arena got electrified after Fed chair Jerome Powell escalated guidance on interest rates.

A rate hike by 75 basis points (bps) was already expected by the market participants and the latter have already priced them in risk-perceived assets. However, a higher-than-expected hawkish stance on interest rates by the Fed spooked the market sentiment.

The Fed sees terminal rates making top at 4.6%, higher than the former expectations of 3.8%. Fed’s Powell is ready to sacrifice the growth projections, employment generation, housing sales, and demand for durable goods to fix the inflation chaos.

Meanwhile, the shared currency bulls are worried over fresh impetus on Russia’s nuclear attack talks. Russian leader Vladimir Putin’s announcement of military mobilization and threat to use nuclear weapons have refreshed fears of war situation. The retaliation from Russia against western sanctions has triggered a risk-off impulse.

Also, the German government is exploiting its all measures of collecting energy to make sufficient inventories to cater to the demand during the winter season.