And finally, bulls were able to profit yesterday. The best performer was the euro which soared to a high of 1.10 following Federal Reserve Chair Jerome Powell’s comments. The cable, however, proved to be difficult to trade with two false breakouts before a final third buy order compensated some losses.
The Fed raised rates as expected with a 25bp hike and warned of further rate hikes which, however, didn’t interrupt the market’s dovish speculations. Powell stressed that the central bank ‘will need to stay restrictive for some time’ and that inflation remains elevated. Policymakers see no rate cuts this year which deviates from the market’s view which prices in 2 rate cuts towards the end of this year. The market’s disbelief could quickly result in disappointment if there is something hard and fast to change its view.
Today, both European Central Bank and Bank of England are anticipated to raise their rates by 50bp. The ECB decision poses, however, a risk to the lofty euro.
The euro tested the upper ascending trendline of its recent uptrend channel. If euro bulls are unable to push the euro above 1.1060 and thus towards the next resistance at 1.12, we could see a sharp correction. The current support area is seen between 1.08 and 1.07.
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Disclaimer: All trading ideas and expressions of opinion made in the articles are the personal opinion and assumption of MaiMarFX traders. They are not meant to be a solicitation or recommendation to buy or sell a specific financial instrument.