Published on 26.01.2022 15:01

The Euro is trading lower for a 3rd straight day against the US dollar due to political tensions between Ukraine and Russia and the possibility that the US federal Reserve President will present a bullish front when he gives a speech on the US economy later today.

It what is shaping up to be the biggest trading day of the year so far, The Fed is due to make its latest interest rate decision in a few hours from now, which will be followed by a monetary speech from US Central Bank boss Jerome Powell.

It is widely expected in the market that the Fed will leaves rates on hold at record levels as it did last month. The volatility in the EUR/USD currency pair will come with the following statement where Investors expect FOMC policymakers to signal that there will be a 25-basis points rate hike in March.

Mr Powell is likely to be hounded by the press during question time about the possibility of a balance sheet reduction and the timing of any further rate hikes to be delivered this year. He is also expected to be quizzed on the current inflations levels in the US which are at their highest in more than 40 years and how the Fed plan to deal with this.

Until recently they have been brushing off the record high inflation levels as temporary which was caused by the post covid economic recovery but as time goes by, they are having a hard time convincing market participants that this is the case.

From a technical view on the chart, we can see that the EUR/USD currency pair has broken down through the key support level of $1.1286 as the Fed rate decision approaches today which shows that most traders believe the Fed are going to come out aggressive with regards to rate hikes.

If this is not the case, and the Fed refrain from over promising on rate hikes, we could see a significant rebound in the Euro to the former resistance level of $1.1356.

On the other hand, any further moves below the $1.1286 mark may see the EUR/USD pair move towards the next support at level at $1.1201 which will be very bearish and open the flood gates for a move down towards the $1.1100 mark.


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