On Wednesday the 21st of March, trading on the EURUSD pair closed up. The single currency sharply rose following the FOMC meeting and the Fed chair’s speech.
The FOMC increased the federal funds rate by 0.25% to 1.75%. In terms of the key rate, the Fed’s projection for 2018 remains the same at 3 rate hikes, while they revised their outlook for 2019 from 2 rate hikes to 3. Since yesterday’s rate hike had already been factored in by markets and investors were more worried about the number of rate hikes we’d see this year, the dollar slumped across the board in response to these projections. The euro recovered to 1.2350 and has hit 1.2369 in today’s Asian session.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart. Source: TradingView
The FOMC disappointed dollar bulls yesterday by increasing the number of rate hikes in its economic projection for 2019, while leaving its projections for 2018 unchanged. As a result, the EURUSD pair returned to the daily trend line at 1.2369.
Considering that yesterday’s high of 1.2369 has been reached in Asia, and hourly indicators suggest a declining euro, I’m expecting to see the rate drop to 1.2346. As most of the euro crosses are trading up, I’m expecting the 112th degree at 1.2379 to be tested ahead of the US session.
I don’t think we’ll see a breakout of the trend line today, but there’s still a risk of moving upwards. After the breakout on the daily timeframe, buyers are pushing the price towards 1.2463. Keep an eye on the EURGBP cross, because the Bank of England is announcing its interest rate decision at 15:00 EET. The EURGBP pair will have an effect on the EURUSD pair when this news comes out. If the 1.2335 support falls, we will most likely see a 45-degree correction to 1.2313.