- The US Federal Reserve upwardly revised its growth and inflation forecasts.
- US policymakers moved forward rate hikes expectations, according to the dot-plot.
- EUR/USD is bearish despite oversold, further declines likely once below 1.1985.
The EUR/USD pair spent the day hovering in the 1.2110/20 price zone, unable to move ahead of the US Federal Reserve’s decision. The central bank has left the interest rate and its easing programs unchanged as widely anticipated, but there was a clear hawkish shift in the economic projections. Policymakers see US GDP growing 7.0% in 2021 from a previous 6.5%and 3.3% in 2022. On inflation, PCE figure is now seen at 3.4% for this year and at 2.1% for the next one.
Policymakers reiterated that rates will remain unchanged “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 per cent and is on track to moderately exceed 2 per cent for some time.” However, the dot plot showed that 7 Fed officials expect hikes in 2022, while 13 expect hikes in 2023. Chief Jerome Powell said that the revisions came as inflation accelerated faster and could be more persistent than expected.
The EU macroeconomic calendar had nothing to offer, while the US published May Building Permits, down 3% in the month, and Housing Starts, which were up by 3.6%. On Thursday, the Union will publish May inflation figures, with the annual Consumer Price Index foreseen at 2%. The US will publish the June Philadelphia Fed Manufacturing Survey and Initial Jobless Claims for the week ended June 11, foreseen at 359K.
EUR/USD short-term technical outlook
The EUR/USD pair plummeted with the headline, currently trading near a daily low of 1.20, oversold but bearish in the near-term. After shedding over 100 pips with the Fed, the 4-hour chart shows that technical indicators keep heading firmly lower within negative levels. The pair is sharply below a bearish 20 SMA after spending the last two days trying to recover above it. May’s monthly low at 1.1985 is the immediate support level. The pair could recover some ground amid oversold conditions, yet as long as it trades below 1.2050, bears will retain control.
Support levels: 1.1985 1.1940 1.1890
Resistance levels: 1.2050 1.2095 1.2140
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