The EUR/USD pair experienced a pullback from 1.0850 following the Federal Reserve’s decision to hold rates steady. The Fed’s “dot plot” indicates a reduced likelihood of rate cuts in 2024, with a shift towards higher interest rates. This adjustment in the Fed’s interest rate outlook suggests that rates are expected to remain elevated for a longer period.
Fed Chair Jerome Powell emphasized in his speech that despite some improvements in labor and inflation data, the central bank is cautious about making any moves towards rate cuts. Powell mentioned that while inflation has eased slightly, it still remains elevated. The EUR/USD pair initially surged after US Consumer Price Index (CPI) inflation data showed a faster-than-expected cooldown in May.
EUR/USD’s technical outlook shows the pair hovering around 1.0825 after an initial spike to 1.0850. The pair faces resistance near the 200-day Exponential Moving Average (EMA) at 1.0790 and descending trendlines from earlier highs. Despite market confidence in the midweek session, cautious sentiment and technical barriers have limited further upward momentum for the EUR/USD pair.