The US dollar maintained its strength in New York session trading Tuesday yesterday following the release of US producer price index data with rising figures in line with forecasts for May.
Also giving an indication of inflation risk in the US further boosted investor confidence to see the Federal Reserve (Fed) raise interest rates more aggressively at the FOMC meeting early this Thursday morning.
The previous expectation of 50 basis points for an interest rate hike has changed to 75 basis points after being driven by a surge in US inflation data published last Friday.
Although most major currencies in the market continued to perform poorly, the Euro was however seen to begin to absorb the pressure of the strengthening US dollar supported by hawkish comments by members of the European central bank (ECB) meeting.
A 25 basis point hike will be expected in September, before higher upside signals are expected in October and December by the ECB.
On the price chart of the EUR/USD pair, the bearish momentum is seen starting to slow as the price is seen hovering above the latest support level at 1.04000.
There was a rally in the European session yesterday, but after testing the Moving Average 50 (MA50) barrier level on the 1 -hour time frame on the EUR/USD chart, the price continued to decline in New York session trading giving a bearish signal for price movement.
Still supported by the 1.04000 level, the price rose again in the Asian session this morning (Wednesday), retesting the MA50 barrier.
The outcome of the FOMC meeting will determine the direction of further price movements. In the meantime, price movements are likely to be more flat.
If the price continues lower past the 1.04000 support, the price will record the latest 20 -year low with the target reaching 1.03000.
On the other hand if the price manages to jump from the support level of 1.04000, passing the resistance at 1.05000 will be a signal for a change of bullish trend.
The continued rise will re -target the previous focus level around 1.06000 or higher towards 1.07000.
