EUR/USD decline is stopped by Fed

Source: Dukascopy Bank SA


On May 1, US monetary policy makers, who decide upon the supply of the US Dollar, announced the Federal Funds Rate. The rate is used as a base rate for all USD denominated debt. The Fed has kept the interest rate unchanged at 5.50%, as the financial markets expected. In addition, the central bank has published the Federal Open Markets Committee Statement. The statement reveals the basing of the decision by the committee that decides upon the policy. The initial reaction to the news was a dip of the USD, as the Fed had reduced the balance sheet redaction to $300 billion from $720 billion when the program was started in 2022.

However, most price action occurred during the follow up press conference at 18:30 GMT up to 19:30 GMT. The press conference is more notable due to the Chairman of the Federal Reserve taking journalist questions. If the journalists do their job properly, they get more information out of the Chairman about the future supply and value of the USD.

In general, the Chairman said that the Fed is not thinking to do anything. It would take a lot of bad economic data for the Fed to cut interest rates. Meanwhile, potential hikes would take a lot higher than current inflation. Moreover, the Chairman expressed that inflation should decrease when the winter passes and shelter costs decrease. Namely, as people spend less for heating, inflation numbers are set to go down.

On the EUR/USD charts it all resulted in a sudden move above the 1.0675/1.0700 range. The range had previously failed to hold as support and was turning into resistance. These fundamental events have moved the rate back above the zone and the support of the 50, 100 and 200-hour simple moving averages and the weekly simple pivot point at 1.0689.

A surge of the Euro against the US Dollar could face resistance in the 1.0740/1.0750 range and the weekly R1 simple pivot point at 1.0755. Higher above, the 1.0800 mark is set to keep the pair down.

On the other hand, a decline of the rate below the 1.0675 level and all the technical levels in the 1.0675/1.0700 range might find support in the 1.0650 level. This level was strong enough to reverse a decline on May 1st. Further below, note the weekly S1 simple pivot point at 1.0626 and the 1.0600/1.0610 range.
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