During the Asian session on Wednesday. The EURUSD pair oscillates in a narrow zone, consolidating the recent robust gains achieved over the previous four sessions, reaching its highest level since mid-February.
The USD remains weak despite bets on a less aggressive Fed, although it does provide some assistance to EURUSD.
The US Dollar (USD) is hovering at a five-week low and has emerged as a critical component serving as a tailwind for the major. Fears of a full-fledged global financial crisis, as well as predictions that the Federal Reserve (Fed) may ease its aggressive attitude, put USD bulls on the defensive. The persistent turmoil in the banking industry has prompted investors to reduce their expectations for the US Federal Reserve to tighten policy more aggressively. In fact, current market pricing implies a higher likelihood of a 25-basis point rate rise.
Markets appear to have taken a step back ahead of the important FOMC decision.
later today, at the conclusion of a two-day FOMC monetary policy meeting. Additionally, market investors believe the Fed will begin decreasing interest rates in the second half of the year. As a result, the accompanying policy statement. The updated economic outlook, and Fed Chair Jerome Powell’s statements at the post-meeting press conference will be highly studied for signals regarding the Fed’s future rate-hike course will be closely scrutinized. This will have an immediate impact on USD price dynamics and offer a new directional push to the EURUSD pair.
The USD bulls are unmoved by a significant follow-through increase in US Treasury bond rates. On Tuesday as we approach the main central bank event risk. This, along with the possibility of larger rate rises by the European Central Bank (ECB). Indicates that the major’s path of least resistance is to the upward.
It is worth mentioning that ECB President Christine Lagarde reiterated. On Monday before the European Parliament’s Committee on Economic and Monetary Affairs. That the inflation forecast alone would justify more rate rises. This helps to balance the overnight dismal announcement of the German ZEW Economic Sentiment Index. Which fell drastically from 28.1 to 13.0 in March and fell short of expectations for a reading of 16.4. Still.
The fundamental background remains strongly in favor of EURUSD bulls. Albeit traders may choose to wait for a new catalyst before making aggressive directional bets. Furthermore, the overnight decisive close above the 50-day Simple Moving Average (SMA) lends credibility to the near-term outlook. The major has a bright future.
