Good day forex traders,
Welcome to the weekly review of the EUR/USD currency pair. In the previous forecast we noted on the consolidation that was happening between 1.22 and 1.26. We are now at levels that were met prior to 2017.
Looking at the EUR/USD weekly chart above, I would like to point out to the fact that the current consolidation phase has been going on since the start of 2018. This is uncommon and may suggest an undecided market.
The US Federal Reserve has decided to hike interest rates in view of the stronger economy. BBC reports ”
The US central bank has said it will raise its benchmark interest rate citing a strengthened economic outlook.
The Federal Reserve said it had decided to raise the rate by 0.25% to a target range of 1.5% to 1.75%.
Policymakers also signalled they would increase rates twice more this year, while raising the forecast for rate hikes in 2019.
Federal Reserve Chair Jerome “Jay” Powell also sounded a warning about rising trade tensions.
The Trump administration recently announced steel and aluminium tariffs and is weighing sanctions against China, actions that have led to threats of retaliation.
Mr Powell said some Fed members are worried about the possibility of a trade war, referencing conversations between central bankers and business leaders.
“They’re seeing it as a risk to the outlook,” Mr Powell said at a press conference at the close of the Fed’s two-day meeting in Washington. ” ”
In view of the climbing interest rate, we are likely to see an increase of demand for the US dollar. The undoing of the quantitative easing measures will also reduce the supply of money. These developments if indeed so, will likely exert a downside push for the EUR/USD.
The upcoming week brings us the US Non-Farm Payroll. We should monitor the release as a better job employment rate and wages would indicate a positive economy. This in turn may increase the strength of the US dollar.