Fed’s Hawkish Pause

The Federal Reserve will keep interest rates unchanged for a second time today but could leave open the possibility of another hike as soon as December. Market participants expect today’s decision to be kind of a ‘hawkish pause’ while expressing the potential need for another rate increase. A definitive end of the Fed’s hiking cycle will hinge on labor and inflation data over the next months.

As for the Israel-Hamas war, Powell has highlighted elevated geopolitical tensions which is why the FOMC may discuss whether to include this as a risk in its statement as well.

Traders expect that the market reaction to today’s decision could be muted, so we will not go for big profits today.

The Fed decision will be released at UTC, followed by Chair Jerome Powell’s press conference 30 minutes later.

Our technical focus hasn’t’ changed since Monday:

EUR/USD: Below 1.0530, the euro could test the 1.05-support again on its hold but if 1.0440 breaks again, we could see a free-fall towards 1.02. On the upside, we expect the 1.07-region to serve as a resistance.

GBP/USD: We will now wait for price breaks either below 1.2070 or above 1.2260. A next lower target will be at 1.18 whereas on the upside the next target would be 1.24.

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