The price of the euro against the US dollar, EUR/USD, interacted with yesterday's important event, which was the US Federal Reserve's announcement to raise interest rates by a quarter of a point, as was expected. Accordingly, the EUR/USD currency pair rebounded amid a cautious move towards the 1.1106 resistance level, before settling around 1.1085 at the beginning of trading today, Thursday, as it awaits new important and influential events led by the European Central Bank’s announcement of updating its monetary policy, in addition to announcing a growth rate.
According to an official announcement, the US Federal Reserve raised its key interest rate for the 11th time in 17 months, a series of hikes aimed at curbing inflation but also carries the risk of going too far and triggering a recession. The move raised the Fed's benchmark short-term rate from about 5.1% to 5.3% - its highest level since 2001. In addition to previous interest rate increases, the Fed's latest move could lead to further increases in mortgage costs. Real estate and car loans. credit cards and business borrowing.
Today's ECB policy meeting may pressure more good news out of the EUR according to analysts who see a slowing economy and falling inflation as reasons to believe the July rate hike will be the last. All in all, the ECB has already committed to raising interest rates again in July at its meeting in June, which means that the decision to raise interest rates will not be significant to the market, but changes in guidance related to raising interest rates in September may lead to exchange rate volatility.
The euro was one of the best-performing foreign currencies in 2023 due to improved economic sentiment as the energy shock faded in 2022 and with higher interest rates from the European Central Bank boosting the attractiveness of eurozone assets. By raising interest rates by another 25 basis points today, Thursday, the ECB deposit rate will rise to 3.75% and MRO to 4.25%. Ahead of the decision, we see that the Euro Trade Weighted Index - a broader measure of the euro's performance against a group of currencies - is near an all-time high.
EUR/USD Technical Outlook
- According to the performance on the daily chart below, the EUR/USD price is still in a bearish correction path, and as I mentioned before, moving below the psychological level of 1.1000 will give the bears more impetus to test stronger support levels.
- The most important of them is to confirm the shift to the downside, the support level of 1.0885.
- On the other hand, over the same period of time, the bulls will not have stronger control over the trend without moving toward the resistance level of 1.1250 again.
Hints from the European Central Bank today for the future of tightening and the US economic growth figure will shape the performance of the Eurodollar for what will be the weekly close for the currency pair.
Ready to trade our daily Forex forecast? Here’s a list of some of the best regulated forex brokers to check out.