EUR/USD At Risk Of Falling Further And Reach Fresh 2021 Lows

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

EUR/USD Current price: 1.1696

• US Federal Reserve chief Powell anticipated tapering "may soon be warranted."
• The FOMC downwardly revised growth forecasts, upwardly revised inflation ones.
• EUR/USD at risk of falling further and reach fresh 2021 lows.

The EUR/USD pair is down Wednesday, finally piercing the 1.1700 level. The pair was confined to a tight range ahead of the US Federal Reserve decision on monetary policy. The US central bank has left its monetary policy unchanged as expected but hinted at soon-to-come tapering. "If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted," the FOMC's statement said.

At the same time, the dot-plot showed higher chances for a 2022 hike, while the Committee revised its economic projections. On GDP, policymakers now see it up 5.9% this year, down from 7% in June. However, 2023 growth is now seen at 3.8%, compared to 3.3% previously, and 2.5% in 2023, also higher than previously. The Fed sees inflation higher than its previous estimates, at 2.3% in 2022 and 2.2% in 2023.

Chief Jerome Powell offered a speech and clarified that, while the inflation threshold for tapering has already been achieved, the one for employment is only seen by "many" FOMC members but not all. "Many on FOMC think the test for employment to taper has been met; others think it is close," he said. Among other things, Powell said that the Fed can easily move ahead at the next meeting... or not. Quite a hawkish message in general, as he added that he does not need to see an impressive employment report, just a good one to get convinced the job sector has reached the desired threshold.

Earlier in the day, the EU published the preliminary estimate of September Consumer Confidence, which improved by more than anticipated to -4 from -5.3 in August. The focus will be the preliminary estimates of Markit September PMIs for the EU and the US on Thursday. The latter will also publish the official ISM figures for the same month and Initial Jobless Claims for the week ended September 17.

EUR/USD short-term technical outlook

The EUR/USD pair peaked at 1.1755, as the greenback fell as an immediate reaction to the statement, appreciating with Powell's speech. The pair currently trades in the 1.1700 area, not far from the year low at 1.1663. EUR/USD resume its slump after two days of consolidation, and the daily chart shows that bears are far from done, as it stands well below all of its moving averages, with the 20 SMA resuming its decline. Meanwhile, technical indicators head firmly lower, approaching oversold readings.

In the near term, and according to the 4-hour chart, the pair is also poised to extend its slump. It briefly advanced above a bullish 20 SMA but is now well below the moving average, while technical indicators turned sharply lower, the Momentum around its midline and the RSI at around 33. The next relevant support is the yearly low, with a break below it anticipating a steeper decline ahead.

Support levels: 1.1660 1.1620 1.1575

Resistance levels: 1.1710 1.1755 1.1780  

Image by Bruno /Germany from Pixabay

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.