The EUR/USD pair continued its bearish trend after the latest FOMC decision.
- Sell the EUR/USD pair and set a take-profit at 0.9700.
- Add a stop-loss at 0.9950.
- Timeline: 1 day.
- Set a buy-stop at 0.9895 and a take-profit at 1.0000.
- Add a stop-loss at 0.9800.
The EUR/USD price continued its bearish trend after the Federal Reserve continued its hawkish tone. It crashed to a two-decade low of 0.9815, the lowest point since November 2002. The pair has dropped in the past four straight days and by more than 13% this year.
US bond yields surge
The EUR/USD price crashed in the overnight session after the Fed delivered its third consecutive 0.75% rate hike this year. The bank has hiked rates by 300 basis points and pushed the official cash rate to 3.25%. This was the highest level that America’s inflation has been since 2008
In the aftermath of the jumbo rate hike, the US dollar index surged to the highest point in more than 20 years. At the same time, the Dow Jones and the S&P 500 indices continued slipping while the 2-year government bond surged to 4.1%. This is a sign that investors believe that the Fed will continue hiking interest rates in the coming months. Officials believe that rates will end the year at 4.4% and then peak at 4.6% in 2023.
Indeed, in the statement, the Fed committed to returning inflation to the neutral level of 2.0%. With inflation at 8.3% and with the crisis in Ukraine escalating, analysts believe that the bank will continue hiking. Still, a key positive factor for the Fed is that US inflation expectations have fallen to the lowest level since October last year.
There will be no major economic data from the US on Thursday other than the weekly jobless claims numbers. Economists expect that initial claims rose from 213k to 218k while continuing claims dropped from 1.403M to 1.40M. In Europe, the European Central Bank will publish the economic bulletin.
The EUR/USD pair continued its bearish trend after the latest FOMC decision. As it dropped, it moved below the lower side of the bearish flag pattern that is shown in black. It also fell below the crucial support at 0.9865, which was the lowest level on September 6. It has fallen below the 25-day and 50-day moving averages while the Awesome Oscillator moved below the neutral level.
Therefore, the pair will likely continue falling as sellers target the key support at 0.9700. A move above the resistance level at 0.9950 will invalidate the bearish view.