Euro Fails Dithers Despite Weaker US Dollar Post Fed Hike. Where to for EUR/USD?

Euro, EUR/USD, US Dollar, Crude Oil, EUR/GBP, BoE, SNB – Talking Points

  • Euro remains sidelined for now as US Dollar dominates markets
  • APAC equipment movedup and the rosy mood lifted growth linked currencies
  • All eyes on central bank action from here.Will USD resume its uptrend?

The Euro has held steady even though the US Dollar faces headwinds after the Fed raised rates by 75 basis points.

Treasury yields dipped after Fed Char Jerome Powell said that a 50 or 75 basis point hike will be the discussion at the next Federal Open Market Committee (FOMC) meeting. The easing of yields helped to generalize the US Dollar.

With inflation currently running at an annual clip of 8.6%, the tenacity of the Fed to fight runaway prices is being questioned by the market.

EUR/GBP rejected an attempt yesterday to make a new high and with the Bank of England (BoE) rates decision today, volatility could resurface.

EUR/JPY is caught in a sideways grip for now and EUR/CHF is also in a range trade set up ahead of the Swiss National Bank (SNB) rate decision today. EUR/USD was unable to capitalise on the ‘big dollar’s’ frailty and is relatively steady.

The big gainers in the aftermath of the Fed’s decision were AUD, GBP, JPY and NZD. The Australian Dollar was given an extra boost from strong jobs data today. It comes hot on the heels of very hawkish comments from RBA Governor Philip Lowe on Tuesday.

The Australian unemployment rate for May came in at 3.9% against 3.8% forecasted and 3.9% previously. The overall change in employment for the month was 60.6k instead of 25.0k anticipated. Full time employment increased a whopping 69.4k, while 8.7k part time jobs were lost in May.

Following on from Wall Street’s upbeat lead, APAC equities are mostly in the green with Hong Kong’s Hang Seng Index (HSI) the only major bourse in the red.

Gold held onto overnight gains in the Asian session, trading near US$ 1,830 at the time of going to print. Crude oil remains under pressure after the Energy Information Administration (EIA) report noted an increase in inventories of 2 million barrels, instead of an anticipated drop.

The Swiss National Bank (SNB) will be making their rate decision prior to the BoE. The US will see data on housing and building permits.

The full economic calendar can be viewed here.

EUR/USD Technical Analysis

After failing to hold above a descending trend line, EUR/USD fell back into the range and has spent the last few sessions in a largely sideway pattern.

A dip toward the prior low was also rejected and the 1.3040 – 1.3050 zone might provide support if tested again.

Resistance might be offered at a cluster of simple moving averages (SMA) above the price or a series of prior highs in the 1.0757 – 1.0787 area.

Chart cread in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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