Post-FOMC EUR/USD Weakness to Subside on Detailed ECB Exit Strategy

Euro Talking Points

EUR/USD fast retraces a decrease following a 25bp rate-hike from a Federal Open Market Committee (FOMC), with a sell rate during risk of entertainment a some-more suggestive miscarry over a residue of a week if a European Central Bank (ECB) unveils a some-more minute exit-strategy.

Image of daily change for vital currencies

Post-FOMC EUR/USD Weakness to Subside on Detailed ECB Exit Strategy

Image of daily change for EURUSD

Even yet a FOMC appears to be on lane to exercise 4 rate-hikes in 2018, a uninformed updates from Chairman Jerome Powell and Co. advise a executive bank is in no rush to extend a hiking-cycle as officials continue to plan a longer-run neutral Fed Funds rate of 2.75% to 3.00%.

At a same time, it seems as yet a Fed will endure above-target cost enlargement for a foreseeable destiny as ‘indicators of longer-term acceleration expectations are small changed,’ and a immobile forecasts interconnected with a tolerably hawkish tinge appears to be sapping a seductiveness of a greenback as a FOMC tames bets for a some-more assertive normalization cycle.

With that said, courtesy now turns to a ECB assembly as a Governing Council is also slated to benefaction a updated mercantile assessment, and a uninformed tongue from President Mario Draghi and Co. might worsen a seductiveness of a singular banking if a executive bank shows a incomparable eagerness to pierce divided from a easing-cycle. The ECB might ready European households and businesses for a reduction accommodative position as a quantitative easing (QE) module is set to end in September, and a Governing Council might finish asset-purchases forward of a deadline as ‘the underlying strength of a euro area economy continues to support a certainty that acceleration will intersect towards a acceleration aim of below, though tighten to, 2% over a middle term.

However, a ECB might merely try to buy some-more time as ‘an plenty grade of financial impulse stays required for underlying acceleration pressures to continue to build adult and support title acceleration developments over a middle term,’ and some-more of a same from a ECB is expected to drag on a euro sell rate as a executive bank keeps a doorway open to serve support a financial union.

EUR/USD Daily Chart

Image of EURUSD daily chart

  • Broader opinion for EUR/USD stays mired by a mangle of a November-low (1.1554), with a unsuccessful attempts to tighten above a 1.1790 (23.6% retracement) to 1.1810 (61.8% retracement) segment lifting a risk for serve waste as a sell rate carves uninformed array of reduce highs lows lifting a risk for serve losses.
  • In turn, a mangle subsequent a 1.1670 (78.6% expansion) to 1.1680 (50% retracement) segment opens adult a 2018-low (1.1510), with a subsequent area of seductiveness entrance in around 1.1390 (61.8% retracement).
  • However, new developments in a Relative Strength Index (RSI) raises a range for a incomparable liberation as a oscillator breaks out of a bearish arrangement from progressing this year, with pierce above a 1.1790 (23.6% retracement) to 1.1810 (61.8% retracement) segment opening adult a subsequent area of seductiveness around 1.1940 (23.6% retracement) to 1.1970 (23.6% expansion).

For some-more in-depth analysis, check out a Q2 Forecast for a Euro

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— Written by David Song, Currency Analyst

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