After an intense session in the foreign exchange market with the exchange rate moving strongly in both directions as we expected yesterday due to ECB statements and FED meeting, the pressure on the euro has returned sharply, moving again below the levels of 1,04.
There was no any surprise, The US Federal Reserve’s decision and the 75 basis point increase in interest rates was fully expected.
For its part, the European Central Bank at the unsceduled meeting , only temporarily managed to give a boost to the European currency as there was no announcement that would have the ability to change the data for the Eurozone at this moment.
The pair yesterday for the second time after 12 May finds significant support above 1,0350 and seems to be temporarily resisting.
As mentioned yesterday, the exchange rate is now very sensitive to the policy of central banks that create the future landscape for interest rates, and as things stand, the US Federal Reserve, like other central banks, seems to be pursuing a more aggressive policy than the ECB.
Although we are gradually becoming more cautious about the continuing upward trend of the dollar, we must realize the increased chances of seeing the break-up of the significant level of support at 1.0350, with the simultaneous execution of “stop loss orders” ,.
As stock markets pressures return today, yields on long-term US government bonds remain high and the ghost of inflation is a reality , we will hardly see the euro trying to react and beyond some corrections would be very difficult currently to change market dynamics.
Source: Vasilis Tsaprounis – TopFX