We saw a strong market reaction with a broad-based sell-off on Tuesday after Federal Reserve Chair Jerome Powell signaled his appetite for faster tapering of the Fed’s stimulus, speaking unexpectedly in a more hawkish tone. He warned that high inflation could justify ending asset purchases sooner than planned. On top of that, bearish momentum accelerated amidst anxiety around the coronavirus. Stocks and counterparts of the greenback fell sharply following Powell’s testimony.
However, markets returned to normal following the hawkish shift while EUR/USD and GBP/USD finally ended yesterday’s trading day virtually unchanged.
EUR/USD: We still see some room for a bullish extension toward 1.1430, provided that the euro is able to hold above 1.1250.
GBP/USD: The cable plunged to a low of 1.3194 before stabilizing above 1.3280. We now see a next higher target at 1.3450. Falling again below 1.3240 we will turn our focus to a lower price target at 1.3150.
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