EUR/USD Strengthens as Fed Sees Rate Hikes Slowing Down ‘Soon’

The Euro closed higher against the U.S. Dollar Wednesday, soaring to a one-week high, as meeting minutes from the Federal Reserve showed that the central bank is looking to hand out smaller rate hikes in the coming months as inflation cools off.

At 20:30 GMT, the EUR/USD is trading 1.0400, up 0.0097 or +0.94%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $95.98, up $0.95 or +1.00%.

Minutes from the Fed’s November meeting signaled that the central bank is seeing progress in its fight against high inflation and is looking to slow the pace of rate hikes, meaning smaller ones through the end of this year and into 2023.

In economic news, the German yield curve inverted further and spreads between core and peripheral bond yields tightened after Purchasing Managers’ Index (PMI) data showed that overall demand continued to decline, suggesting a shorter monetary tightening path.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6386 will change the main trend to down. A move through .6798 will signal a resumption of the uptrend.

The minor range is .6798 to .6585. Its pivot at .6691 is the nearest support. This is followed by a retracement zone at .6631 to .6543.

On the upside, the nearest resistance is the longer-term 50% level at .6760.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at .6760 is likely to determine the direction of the EUR/USD on Thursday.

Bullish Scenario

A sustained move over .6760 will indicate the presence of buyers. The first upside target is the main top at .6798. Taking out this level could trigger an acceleration to the upside with the September 13 main top at .6916 the next likely upside target.

Bearish Scenario

A sustained move under .6760 will signal the presence of sellers. If this creates enough downside momentum then look for a pullback into the minor pivot at .6691. A failure to hold this level could trigger a break into the Fibonacci level at .6691.