EUR/USD Forecast: Extends rally above 1.1200 as the Fed delivers a rate cut

Current Price: 1.1168

• Federal Reserve decides to cut rates by 50 bps in an emergency/unscheduled move to support growth.
• EUR/USD jumps and approaches December’s highs after surprise Fed rate cut.

The EUR/USD pair jumped above 1.1200 and hit its highest level since early January after the Federal Reserve decided to cut interest rate in an emergency/unscheduled move. FOMC members voted unanimously to cut the fed funds rate target by 50 bps, lowering the range to 1.00-1.25%. Despite the Fed reiterated that “the fundamentals of the US economy remain strong,” the risks posed by the coronavirus outbreak seemed too worrisome to wait until March 18 when Fed’s next meeting is scheduled. The Fed said in a statement that is closely monitoring developments and “will use its tools and act as appropriate to support the economy”. In other words, the central bank remains ready and willing to act further.

EUR/USD short-term technical outlook

EUR/USD rallied to a high of 1.1213 after the announcement, but failed to hold above the 1.12 mark. The short-term technical picture continues to favor the upside, although the pair needs to correct overbought conditions after the rapid spike witnessed today. The pair broke decisively above the 200-day SMA and the 61.8% retracement of the December-February drop on Monday, so a move towards 1.1239 could be expected. A break above December’s high could lead to renewed buying and pave the way to the 1.1300 area. On the other hand, the cluster support area of 1.1100-1.1095 should keep pullbacks contained.

Support levels: 1.1100 1.1075 1.1055

Resistance levels: 1.1240 1.1260 1.1300