EUR/USD: A ''choppy'' trading after 50 points rates cut by Fed – What's next?

Vasilis Tsaprounis Independent Analyst

The single European currency remains steady near 1,1150 level in the early trading hours of Thursday very near at the levels it was at yesterday morning as if no time have passed despite the stormy events in the wake of Fed's meeting and the decision to cut by 50 basis points the key interest rates.

Finally Fed brought to the table what was a big surprise a few weeks earlier and decided to cut interest rates by 50 basis points on the grounds that inflation is moving downwards and approaching the target of 2% set by the Central Bank while at the same time it is necessary to defend US labor sector where it has shown strong signs of cooling.

Although the 50 basis points did not confirm my thinking as my estimate was at 25 points the overall picture of the market did not disappoint me and the strategy for positions in favor of the US currency near 1,12 turned out to be a good idea.

Indeed choppy trading behavior was the key feature in the aftermath of yesterday's Fed meeting, with intense volatility with a temporary peak near 1,12 level and a very quick pullback below 1.11.

Τhe difficulty of the European currency to take advantage of such stormy news which was clearly very negative for the US dollar confirms the thinking that the strong upward momentum of the European currency is a significant challenge and to conquer levels well above last year's highs of 1.1270 will not be an easy task.

At the same time, the European economy continues to have problems while the interest rate reduction cycle has not been closed by both central banks, which will continue to monopolize investors interest and affect the course of the exchange rate.

In my view a 1,08 - 1,14 trading range by the end of the year is a scenario with good chances.

Today's agenda is considerably calmer without any high-profile news with the weekly US jobless claims as every Thursday garnering attention.

Although I had in mind to buy the US currency at some peak in the aftermath of Fed's meeting , I ultimately failed to achieve the correct entry point and consequently i remain currently on hold.

Author

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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