EUR/USD extends its gains toward 1.1300 after the dovish Fed decision

EUR/USD has extended its gains after the Fed opened the door to cutting interest rates, stating that uncertainties have increased. Markets are awaiting EU leaders to divvy up top jobs.

EUR/USD latest news

EUR/USD latest analysis


1. Technical Overview

The pair is now looking to build on its momentum beyond 100-day SMA, above which bulls are likely to aim towards reclaiming the 1.1300 handle. Looking at a slightly broader technical picture, the pair remains well within a descending trend-channel formation extending from early-Jan. swing highs. Thus, any subsequent up-move seems more likely to be capped by the trend-channel resistance, currently near the 1.1325-30 region. Only a decisive break through the mentioned barrier might negate any near-term bearish bias and lift the pair further towards the 1.1400 round figure mark.

On the flip side, the 1.1225 horizontal level, closely followed by the 1.1200 handle now seems to protect the immediate downside. Sustained weakness back below the said support levels might now signal the resumption of the bearish and turn the pair vulnerable to accelerate the slide back towards challenging the 1.1100 round figure mark with some intermediate support near mid-1.1100s.

EUR/USD Pivot points

EUR/USD trading positions


2. Fundamental Overview

The EUR/USD pair witnessed some dip-buying on Wednesday and recovered the previous session's dovish ECB-led slide to two-week lows. The US Dollar was on the defensive amid improving global risk sentiment - led by renewed optimism over a possible resolution to the prolonged US-China trade disputes and was seen as one of the key factors extending support to the major. The intraday positive momentum got an additional boost after the Fed, as was widely expected, signalled possible interest rate cuts later this year. 

The Fed left interest rates unchanged but acknowledged that uncertainties have increased and inflation pressure has receded. The central bank also ditched "patience" from its policy statement, rather said that it would "act as appropriate to sustain the expansion”. The 10-year US Treasury bond yield fell below the 2.0% mark in reaction to the dovish commentary and exerted some downward pressure on the greenback. Meanwhile, the USD selloff remained limited, at least for the time being, as the updated economic projections - the so-called dot-plot signalled that the Fed is unlikely to cut before 2020. 

The pair finally settled around 25-pips off daily lows, albeit regained fresh traction during the Asian session on Thursday and refreshed weekly tops amid some follow-through weakness surrounding the buck. There isn't any major market-moving economic data due for release from the Euro-zone and hence, the USD price-dynamics might continue to act as an exclusive driver of the pair's momentum. Later during the early North-American session, the release of Philly Fed Manufacturing Index, current account figures and the usual initial weekly jobless claims data from the US will be looked upon for some short-term trading impetus. 

EURUSD FUNDAMENTALS TODAY

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FOMC: Prelude to a rate cut?

The Federal Reserve added little new to its policy prescript in Wednesday’s FOMC statement and economic projections and with the anticipation for a July rate cut long priced into market levels the reaction was decidedly uninvolved.

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3. Big Picture

Themes affecting the EUR/USD



Influential Institutions & People for the EUR/USD

The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:

The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism. 

On the other hand we found The Federal Reserve System (Fed) wich is the central banking system of the United States. Fed has two main targets: to keep unemployment rate to their lowest possible levels and inflation around 2%. The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.


Mario Draghi

Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish. 

Jerome Powell

Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.


ECB NEWS & ANALYSIS

FED NEWS & ANALYSIS


About EUR/USD

The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.

Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EUR/USD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.

Related pairs

GBP/USD

The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.

The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.

USD/JPY

The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the 'Majors', the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that's why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.

Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.


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