Dollar firm despite FOMC silence on rate hikes

In spite of markets anticipating a step in the direction of a possible interest rate hike, the Federal Open Market Committee remained cautious and favoured a wait-and-see approach. This didn’t spur dollar bulls as the greenback remains well-supported.

Euro notes
Source: Bloomberg

Euro bounce short-lived

EUR/USD is trading at $1.1296, up 0.16% at the London open following Wednesday’s statement from the FOMC, which despite not alluding to any bullish signals for a rate hike saw dollar pairs remain relatively firm. The overriding rhetoric from the FOMC was very much a continued policy of patience in regards to an interest rate hike.

The FOMC also went on to reaffirm that a rate hike will be very much led by economic data. EUR/USD has continued to reverse from its $1.1423 high (27 January) breaking momentarily below key downside support at $1.1291. Price action is currently trading around this level, supported higher by the pair’s 100-hour moving average level of $1.1280.

Should a sustained move below key support be seen then the next clear downside target is placed at $1.1186. However, should downside support hold then a retesting of $1.1374 should come back into play. 

Sterling remains under pressure

GBP/USD is trading at $1.5118, currently down 0.18% at the London open session on Thursday in spite of a more dovish-than-expected release from the FOMC. A wait-and-see approach remains the policy in regard to a possible rate hike, which has likely been thwarted in the short-term owing to long-term inflation dipping below the committee’s objection as a result of oil prices losing over 60% from July highs.

However, GBP/USD bears remain in control as even better-than-expected UK House Price Index results, which saw prices rise by 6.8% beating expectations of 6.6% year-on-year, were not enough to stem the bearish tide. Any upside in the short-term remains capped by its 50-hour moving average (currently trading at $1.5163). If held, we are likely to see a retesting of current support at the 200-hour moving average at $1.5108.

Should downside support fail to hold then the next clear downside target is placed at $1.5079. However, should $1.5108 offer support then a reversal back up to test resistance at the 50-day moving average is likely. 

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