EUR/USD Faces Volatility Following Powell’s Statements on Rates
By [Errraand News]
[01/02/2024]
The EUR/USD pair experienced notable fluctuations as Federal Reserve (Fed) Chairman Jerome Powell’s remarks EUR/USD Faces Volatility Following
The EUR/USD pair experienced notable fluctuations as Federal Reserve (Fed) Chairman Jerome Powell’s remarks cast uncertainty on rate cut expectations. Initially, the pair surged above 1.0880 on hopes of an ECB rate cut, driven by disappointing German Consumer Price Index (CPI) inflation figures. However, the tables turned after Powell’s comments, leading to a retreat in EUR/USD to around 1.0850.
The rally in early Wednesday trading was triggered by German Retail Sales and CPI inflation missing expectations. The negative figures fueled speculation that the European Central Bank (ECB) might pursue an expedited rate cut path to counteract economic challenges.
EUR/USD’s upward momentum was short-lived as Powell emphasized the importance of inflation figures aligning with the Fed’s 2% ceiling. The Fed unanimously decided to maintain the main policy rate, with Powell underlining the uncertain economic outlook and the necessity for increased confidence in inflation meeting and sustaining the 2% target.
The pair retreated to 1.0850 and further dipped as the market awaited Powell’s statements. Powell’s confirmation that the top is likely in on rates led to a decline in EUR/USD to test 1.0820, and eventually to 1.0800.
Despite the market anticipating a March rate cut, Powell’s insistence on inflation hitting and staying at 2% for an extended period raised questions about the extent of overbidding on rate cut expectations.
Technical Analysis and Market Outlook:
The EUR/USD exhibited a back-and-forth movement, starting at 1.0806, surging to 1.0880, and settling near 1.0850 post-Fed. The 200-hour Simple Moving Average (SMA) acted as a key resistance near 1.0860. The pair has maintained familiar levels since mid-January, but downside pressure is evident as swing highs trend lower.
Daily candlesticks highlight the congestion pattern at the 200-day SMA around 1.0850. Upside movements are restricted by the 50-day SMA slightly above 1.0900.
Investors are closely watching Powell’s statements for further insights into the Fed’s policy outlook. The EUR/USD is poised for potential runs post-Fed, with technical barriers influencing its trajectory. Traders remain cautious as economic uncertainties and inflation concerns continue to shape the market landscape. The Euro’s performance against major currencies this week indicates strength against the Australian Dollar, adding another layer of complexity to the market dynamics.
As the week progresses, attention turns to the US Nonfarm Payroll (NFP) figures on Friday, which could further impact the EUR/USD pair. The likelihood of a March rate cut and the Fed’s cautious stance will be crucial factors influencing investor sentiment and the direction of EUR/USD. Stay tuned for live updates on this dynamic forex pair.
