Breakdown of the latest developments on the global exchanges
Jun 16, 2021, 7:40 PM GMT

FED Projects a Rate Hike in 2023, the EURUSD Tumbles

Interest and Influence: Central Banks and the Global Economic Outlook

The dollar seems poised to continue rallying in the next several weeks following the June FED meeting. To read more about the current trading opportunities on the EURUSD, check out our comprehensive analysis here. Alternatively, you can do the same for the GBPUSD here.

The highly anticipated June meeting of the Federal Open Market Committee (FOMC) of the FED sent the dollar skyrocketing. Jerome Powell and his colleagues finally see a possibility for a rate hike by 2023.

The Bearish downtrend on the eurusd is accelarated following the june meeting of the FED

As can be seen on the daily chart above, FED's policy decision exacerbated the short term woes for the EURUSD. Following the completion of the last bullish 1-5 impulse wave pattern, as postulated by the Elliott Wave theory, the pair now looks poised for a new downtrend.

Today's massive Bearish Marabozu candle (-0.85 per cent at the time of writing) signifies mounting selling pressure. However, the price action is currently testing a major turning point, which gives bulls some glimmers of hope for a rebound.

If the price action manages to break down below the 100-day MA (in blue) and the 38.2 per cent Fibonacci retracement level at 1.20529, which are currently converging, this would allow it to head towards the next psychologically significant support level. This is underpinned by the 61.8 per cent Fibonacci at 1.19195.

Meanwhile, the underlying market momentum is becoming increasingly more bearish-looking, as illustrated by the MACD indicator.

The End of Quantitative Easing is in Sight

The reason for the heightened optimism amongst traders and investors is the fact that the FED has recalibrated its projections. As we have recently forecasted, the FOMC downplayed the imminent risk of inflation getting out of hand, as prices are still expected to converge towards the 2.0 per cent target by 2022.

With the end of the quantitative easing programme in sight, market participants have more reasons to bet on the longer-term strengthening of the dollar.