EUR/USD stays close to YTD lows in the 1.1040/30 band

The selling bias remains around the shared currency remains everything but abated so far today, with EUR/USD navigating the area of 2019 lows in the 1.1040/30 band.

EUR/USD weaker post-FOMC

Spot came under heavy downside pressure on Wednesday, breaking below the key support at 1.1100 after the Federal Reserve reduced its fed Funds Target Rate by 25 bps at its meeting on Wednesday, matching initial estimates.

However, the upbeat sentiment in the buck stayed firm after Chief Powell hinted at the likeliness that the Fed will now remain in a ‘wait-and-see’ mode, mitigating speculations of extra rate cuts in the upcoming months. Also lending support to the Dollar, the Committee’s decision to cut rate was not unanimous, as members Rosengren (Boston Fed) and George (Kansas City Fed) favoured an ‘on hold’ stance.

In the meantime, and while market participants continue to adjust to the recent move by the Fed, the pair is expected to be under further scrutiny in light of the publication of the key ISM Manufacturing across the pond ahead of the critical Non-farm Payrolls tomorrow.

What to look for around EUR

The selling mood around EUR is projected to stay for longer than expected following the recent FOMC event and amidst ECB’s preparations for a fresh wave of monetary stimulus, including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.

EUR/USD levels to watch

At the moment, the pair is receding 0.25% at 1.1047 and faces the next support at 1.1033 (2019 low Aug.1) seconded by 1.1021 (high May 8 2017) and finally 1.0839 (monthly low May 11 2017). On the upside, a breakout of 1.1101 (low Jul.25) would target 1.1194 (21-day SMA) en route to 1.1229 (55-day SMA).