Hello, dear colleagues!
Yesterday, the Federal Open Market Committee (FOMC) summed up its extended meeting. As expected, the key interest rate remained within the range of 0.00-0.25%. There was little doubt about that. As for updated economic forecasts, I will outline the main ones. The Fed officials believe that inflation may total 4.1% this year, while the core indicator may rise to 3.7%. However, the inflation pressure is expected to decrease to 2.2% next year. This year's GDP growth will amount to 5.9%, while in 2022 it will be about 2.5%. As for unemployment, it is forecasted at 4.8% this year and will decrease to 3.8% next year. Only time will tell if these optimistic forecasts will be realized. Besides, the COVID-19 pandemic will play a key role in this situation.
Actually, Fed Chairman Jerome Powell highlighted the importance of the coronavirus vaccination at his press conference. Moreover, the leading US banker emphasized the strong demand for labor and marked inflation expectations stable. At the same time, Powell stated that the Fed would be ready to take measures to curb inflation if necessary. As for the asset purchase tapering program, the head of the Federal Reserve said that employment and inflation would exert a powerful influence in this case. At the moment, Jerome Powell thinks it is possible to complete the quantitative easing tapering program by the middle or close to the end of next year. With at least all necessary conditions completed, it will be quite appropriate. Inherently, the Fed's rhetoric favored the US dollar's dynamics.
As clearly seen on the daily chart of the major currency pair on the Forex market, the price clearly rolled back to the once broken support at 1.1752, but met strong resistance at this point and turned south. Consequently, yesterday's trading on the EUR/USD pair closed below the significant level of 1.1700, a candlestick with a long upper shadow and an impressive bearish body appeared at the bottom. After the formation of these candlesticks, investors mostly expect a further rate decline. However, corrective rebounds are possible and we observe this situation at the moment. I think the basic idea for EUR/USD trading is to sell. Besides, it is better to open positions after the price rolls back up. It is possible to open short positions within the range 1.1720-1.1730 and 1.1750-1.1760. Finally, I would like to mention the macroeconomic events that may have an impact on the EUR/USD trading. Notably, they are the eurozone and US PMI and services reports, as well as the US initial jobless claims.
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