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2 weeks ago
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Most Read: Fed Keeps Rates Steady, Grows Cautious connected Inflation; Gold, USD, Yields Await Powell
The U.S. dollar, arsenic measured by the DXY index, sank much than 0.6% connected Wednesday, pressured by falling U.S. yields successful the aftermath of the Federal Reserve's monetary policy decision. For context, the U.S. cardinal slope near borrowing costs unchanged successful their existent scope of 5.25% to 5.50% and retained its erstwhile guardant guidance contempt rising inflation risks.
Regarding the quantitative tightening program, the Fed announced it would importantly curtail the strategy by which it is shrinking the size of its portfolio of assets. Starting adjacent month, the magnitude of Treasuries allowed to rotation disconnected the equilibrium expanse erstwhile they mature volition beryllium chopped from $60 cardinal to $25 billion. This came arsenic a surprise, with galore enslaved dealers expecting a smaller taper.
Focusing connected the argumentation statement, the papers added a hawkish acknowledgment of the “lack of further progress” connected disinflation, but Chair Powell's consequent property league struck a much dovish tone. Many traders initially believed that the FOMC main would travel retired swinging aft the drawstring of unfavorable CPI, PPI and halfway PCE readings successful 2024, but helium failed to clasp a much assertive stance.
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While Powell did item a precocious threshold for easing and noted that it would astir apt instrumentality longer than initially envisioned to pivot to a looser stance, helium made it dependable similar the barroom for resuming hiking borrowing costs is adjacent higher. Some traders, who had been predicting that rates mightiness emergence again, were caught connected the incorrect broadside of the commercialized aft this assessment.
With the Fed failing to clasp a hawkish posture astatine its past gathering, authorities enslaved yields volition conflict to widen their caller rally, removing a bullish catalyst from the U.S. dollar. This does not mean that involvement rates volition commencement correcting little imminently, but alternatively that their upside imaginable whitethorn beryllium constricted going forward.
Against this backdrop, the U.S. dollar could commercialized sideways oregon with a somewhat antagonistic bias successful the adjacent term, though its prospects volition besides beryllium connected the comparative stance of different cardinal cardinal banks, specified arsenic the ECB and the Bank of England.
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EUR/USD FORECAST - TECHNICAL ANALYSIS
EUR/USD rallied connected Wednesday, edging person to reclaiming overhead absorption astatine 1.0725. Bears indispensable staunchly support this ceiling to thwart the momentum from picking up; a nonaccomplishment to bash truthful mightiness trigger an beforehand towards 1.0755. With continued strength, the absorption volition displacement to the 1.0800 mark.
In the lawsuit of a marketplace retracement, enactment is projected to look adjacent to the 1.0700 mark, followed by this week's plaything debased adjacent 1.0645. Looking further down, April's trough adjacent the 1.0600 intelligence threshold volition beryllium the adjacent country of involvement for the bearish camp.
EUR/USD PRICE ACTION CHART
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GBP/USD FORECAST - TECHNICAL ANALYSIS
GBP/USD gained crushed connected Wednesday, pushing past 1.2515 but failing abbreviated of clearing trendline absorption and the 200-day elemental moving mean astatine 1.2550. Traders should ticker this method portion closely, keeping successful caput that a breakout could effect successful a rally towards a Fib ceiling astatine 1.2590.
On the flip side, if sentiment shifts successful favour of sellers and prices caput backmost beneath 1.2515/1.2500, enactment is expected to materialize astir 1.2430. To stave disconnected a much pronounced selloff, bulls indispensable tenaciously support this floor; immoderate lapse could precipitate a swift marketplace downturn towards 1.2305.
GBP/USD PRICE ACTION CHART
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