EUR/USD Forecast: The Fed is going "loco"

EUR/USD Current price: 1.1542

  • US President Trump stole the show ahead of CPI release.
  • US Treasury yields sharply lower following Trump's comments.

"The Fed is going loco and there’s no reason for them to do it. I’m not happy about it.” That ’s what US President Trump said late Wednesday in an interview, following Wall Street's worst day since February, with the DJIA plummeting over 800 points. Of course, he was referring to the Fed's determination to keep on rising rates, as much of equities rout was a consequence of soaring Treasury yields. The greenback fell during Asian trading hours following his comments, with the EUR/USD pair extending its advance up to 1.1572, as government bond yields pulled further lower from the multi-year highs reached this week. The yields for the benchmark 10-year note is currently at around 3.15%, down from 3.21%, while for the 2-year note, the yield is down to 2.83% after reaching 2.90%.

The pair pulled back from the mentioned high and hover around 1.1540 early Europe, as local share markets gapped lower, following Wall Street's collapse, trading dip into the red although off their early lows. US futures, in the meantime, extend their slumps, with the DJIA now over 300 points below Wednesday's close.

Later today, the US will release inflation data for September, usually watched for clues ahead of Fed's next decision. However, seems Mr. Trump has already stolen the show ahead of the event. Furthermore, the Fed has already anticipated a fourth rate hike for December and seems unlikely today's release could change the picture. Anyway, US CPI is expected to have risen 2.4% YoY while the core reading is foreseen at 2.3%, this last, above the previous estimate of 2.2%.

The pair hit the 38.2% retracement of the 1.1797/1.1431 daily decline when reaching its daily high, now holding mid-way between it and the 23.6% retracement of the same decline at around 1.1520, the immediate support. In the 4 hours chart, the pair has moved above a now modestly bullish 20 SMA, while still developing below the 100 and 200 SMA, both around 1.1600/20. Technical indicators in the mentioned chart have stabilized near their recent highs, aiming to resume their advances, all of which leans the risk to the upside.

Support levels: 1.1460 1.1425 1.1390  

Resistance levels: 1.1570 1.1610 1.1645

View Live chart for the EUR/USD

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