EUR/USD Forex Technical Analysis – Fed Policy Change Unclear; Waiting for Powell to Break the Stalemate

The Euro is moving higher against the U.S. Dollar on Wednesday after the Federal Reserve concluded its two-day meeting Wednesday with another three-quarters of a point interest rate hike. This took rates to their highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

At 18:06 GMT, the EUR/USD is trading .9956, up 0.0082 or +0.83%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $91.24, up $0.05 or +0.06%.

Headline Rate Hike Meets Expectations; “Step-Down” in Policy Not Clear

According to CNBC, “Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move. Specifically, some Fed officials along with Wall Street economists and strategists in recent weeks had talked of a “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

That language was not overt in the post-meeting statement from the rate-setting Federal Open Market Committee, though there was a tweak that could point to an adjustment in policy.

It looks as if traders are going to have to wait for Powell’s post-meeting briefing before they’ll know for sure whether the Fed is going to slow down the pace of rate cuts or continue on their hawkish tightening path.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.0094 will reaffirm the uptrend. A trade through .9705 will change the main trend to down.

On the upside, the first resistance is a pivot at .9952, followed by another 50% level at 1.0076.

On the downside, the nearest support is a 50% level at .9868, followed by another pivot at .9815.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at .9952 is likely to determine the direction of the EUR/USD into the close on Wednesday.

Bullish Scenario

A sustained move over .9952 will signal the presence of buyers. If this generate enough upside momentum then look for a surge into the resistance cluster at 1.0076 to 1.0094.

Bearish Scenario

A sustained move under .9952 will indicate the presence of sellers. This could trigger a sharp break into .9868, followed by a pivot at .9815.

Side Notes

The subdued price action after the release of the policy statement and rate hike suggests the Fed was too ambiguous about whether it would slowdown the speed of its future rate hikes. This puts the ball in Fed Chair Powell’s court to break the deadlock.

A hawkish Powell will send the EUR/USD lower. A dovish Powell could trigger an upside breakout.