After the decision of the US Federal Reserve to raise the interest rate by 50.0 basis points to 4.50%, the EUR/USD pair shows a corrective decline, retreating from the local highs of June 9, renewed yesterday.
During a subsequent press conference, regulator chief Jerome Powell noted that inflation remains elevated, so it would be appropriate to continue the hawkish course until the consumer price level drops to the 2% target. Still, as part of further actions, the agency will consider the cumulative effect of measures already taken. Thus, the median forecast assumes an increase in the interest rate to 5.1% by the end of 2023, while 4.6% was previously expected. Also, the process of significant balance sheet reduction will continue. The rhetoric of the US Federal Reserve aimed at a further tightening monetary policy leads to the strengthening of the US dollar and sends the EUR/USD pair into a correction with the target at 1.0460.
The subsequent dynamics of the trading instrument will depend on today's European Central Bank (ECB) decision on the interest rate at 15:15 (GMT+2). According to analysts' forecasts, the indicator will rise by 50.0 basis points, and the regulator will also signal its readiness to continue tightening monetary conditions if the region's economy requires it. Probably, the markets are basing this increase on the price of the euro, so the subsequent press conference of the head of the regulator, Christine Lagarde, will be most interesting: if she expresses her intention to act more aggressively than the American department, then we should expect the euro to rise and strengthen the trading instrument to 1.0780, and otherwise, corrections to 1.0460.
The long-term trend remains upwards, and the asset is trading in a correction with a likely target at the support level of 1.0460, after reaching which it is worth considering new purchases with the target at 1.0780. The RSI indicator is approaching the upper limit of the range, which indicates the risks of the trading instrument being overbought soon.
The medium-term trend is upwards. This week, market participants broke through target zone 4 (1.0599–1.0578), and the next target will be zone 5 (1.0811–1.0790). Now the price is correcting to the key trend support 1.0483–1.0461. If it is holded, it will be possible to consider new purchases with the target at the maximum of the week 1.0690.
Resistance levels: 1.0780, 1.1170. | Support levels: 1.0460, 1.0090.