EUR/USD drops to 1.2000 after Fed’s minutes

  • USD gains momentums and rises after Fed’s minutes. 
  • FOMC minutes: Most officials backed continued gradual rate hikes.

The EUR/USD pair was hovering around 1.2020/30 and remained around that level immediately after the release of the minutes from the latest FOMC meeting. A few minutes later the greenback gained momentum in the market and pushed the pair toward 1.2000. The euro reached a fresh daily low at 1.1999. 

EUR/USD is retreating on Wednesday after reaching yesterday at 1.2080, the highest in four months. As of writing, it is testing the 1.2000 area. 

Earlier today, the greenback gained momentum after the release of US manufacturing data. The ISM  Manufacturing PMI came in at 59.7 in December surpassing market consensus of 58.1. According to analysts from ING, given the strong growth story and the likelihood that inflation will continue creeping higher, we continue to look for three Federal Reserve interest rate hikes in 2018.

The minutes from the December FOMC meeting showed that “several officials” were concern about low inflation expectations. Still, the majority expected inflation to rise to 2%. Officials debated over reasons to speed up or to slowdown rate hikes. A faster inflation coming from tax cut could be a reason to seed up rates hikes.  Most of the members backed gradual rate hikes. 

Technical outlook

To the upside, resistance levels might be located at 1.2035 (20-hour moving average), 1.2065 (Dec 3 high) and 1.2080 (Dec 2 high). On the flip side, support could be seen at 1.2000 followed by 1.1960 (Dec 28 high) and 1.1935 (Dec 29 low). 

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