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Sep 21 - 05:55 PM

EUR/USD - COMMENT-Fed Hike, Updated Forecasts Keep EUR/USD On Downward Path

By Christopher Romano  —  Sep 21 - 03:40 PM

EUR/USD fell below its December 2002 monthly low on Wednesday and is likely on a path to test key support in the 0.9600 area after the Fed hiked rates and indicated more tightening ahead.

Investors got the 75 bps hike that was anticipated but policymakers projected another 75 bps hike in 2022 and no rate cuts until 2024, while raising their median fed funds forecast for end-2023 to 4.6% from the previous 3.8%.

The increased rate view drove Eurodollar prices EDH3 sharply lower and U.S. 2-year yields US2YT=RR above 4.10%, resulting in broad-based dollar gains.

Fed Chair Powell reiterated the commitment to bring inflation down and said a delay in doing so would only lead to more pain nW1N2YE01E.

The statement and Powell's rhetoric will help the dollar maintain its yield advantage over the euro US2DE2=RR which should be a weight on EUR/USD.

Technicals highlight that downside risks remain.
Daily and monthly RSIs are falling and are not diverging, which indicates downside momentum remains.
EUR/USD trades below the sinking 10- and 21-day moving averages.

EUR/USD bears are gaining confidence and may now target structural support in the 0.9600 area.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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