After Fed Focus Turns To ECB
The Federal Reserve hiked interest rates as expected but did not strike a hawkish tone. The U.S. dollar weakened amid the lack of commitment to further tightening.
The euro flirted with the 1.11 handle but trading was limited to a tight price range without major breakouts. The focus now turns to the European Central Bank’s decision today at 13:15 UTC.
The ECB is expected to raise rates by 25bp but traders speculate on a shift in a dovish direction in the face of the deteriorating health of the EU-economy. If traders begin to price out the probability of more tightening in September, the euro could experience a sharp sell-off.
However, from a technical view we see chances for further leg-up towards 1.12. On the downside, if the euro falls back below 1.1020, the next support lies at 1.0970.
Summer doldrums: We advise traders not invest too much or doing a trading break since volatility typically remains at very muted levels during the summer months of July and August. When volatility is low, there is more to lose than to gain.
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