EUR/USD Daily Price Forecast – Greenback Gains Upper Hand against Euro Post FOMC Update

The EURUSD pair took a downward dive post FOMC rate hike update and Asian market hours saw follow through activity resulting in the pair falling from near 1.18 handle below 100 day moving average line.  The follow through activity shows signs of pair breaching 200 day moving average which if comes into reality would result in current bullish Euro’s momentum coming to an end. Despite the “dovish” outcome from the Fed, the overall tone remains the same and the reversal last night was telling that there are still buyers in the dollar and we’re seeing more of that now. Price has not traded below the two key hourly moving averages in over two weeks so this will be a significant break. As of writing this article, the pair is trading at 1.1708 down by 0.27% on the day.

FOMC Statement Interpreted in Both Hawkish / Dovish Manner

The EUR/USD pair created a bearish outside day candle yesterday and could suffer a negative close today on a hawkish interpretation of the Fed policy. The US central bank raised rates by 25 basis point (bps) yesterday. More importantly, it removed the word “accommodative” and kept the interest rate dot plot unchanged, triggering speculation that the tightening cycle is nearing an end. As a result, the EUR/USD jumped to a high of 1.1798. But the spike was short lived and the pair fell back to 1.1726, as the markets quickly realized that removal of the word accommodative does not necessarily mean the Fed is done with the rate hikes and could push rates above the neutral level if the economy shows signs of overheating. This hawkish interpretation may keep the pair under pressure today.

Moving forward, the EURO could suffer further in case the German CPI reading due for release at 12:00 GMT has worse than expected outcome while US Greenback could gain further support for its bull run if the US Q2 GDP and August durable goods figure, scheduled for release today has better than expected outcome which would indicate positive economic scenario in US markets. From technical perspective, a short term trend change in favor of US greenback could be confirmed if the pair closed at or below 1.17 handle. Expected support and resistance for the pair are at 1.1690, 1.1650, 1.1610 and 1.1791, 1.1815, 1.1852 respectively.