The uncertainty of the Federal Reserve System's (Fed) monetary policy strengthens the U.S. dollar in the short term.
According to Fed Chairman Jerome Powell, tensions in the banking sector may indicate the need for less aggressive monetary tightening to curb inflation.
Powell, speaking at a conference in Washington, D.C., noted that problems in Silicon Valley Bank and other organizations could still affect the economy, but the inflation rate is still high.
In this connection, according to the head of the U.S. Central Bank, the rate increase can be continued, but lesser than it would be advisable in other circumstances.
At the moment, U.S. officials are assessing the impact of the latest monetary tightening measures on the economy. According to Powell, considering actions that have already been made, further steps will be determined by incoming data.
Economists, including representatives of the Fed itself, have predicted for a long time at least a slight recession in the economy as a result of higher rates.
An indication of the possible less severe monetary tightening could create an expectation of lower interest rates in the future. This may reduce the attractiveness of the U.S. dollar and affect its fall against the euro, which could lead to a strengthening of the EURUSD pair, but for a very short term.
The situation over the U.S. government debt remains volatile, but it is the most interesting.
On Monday, U.S. President Joe Biden and House Speaker Kevin McCarthy will meet in the White House. Politicians will consider the question of raising the borrowing limit, as well as will discuss ways of preventing a default in the country.
If the U.S. President and the House Speaker manage to set a new debt ceiling today, the U.S. dollar will find support again.
On the hourly timeframe, the EURUSD price is forming a downtrend. Expectation of today's news makes the pair move towards resistance. The descending trend can be continued if the downtrend line is reached.
Signal:
The short-term prospects for the EURUSD pair are to sell around the level of 1.0845.
The target is at the level of 1,0760.
Part of the profit should be fixed near the level of 1,0795.
The stop-loss is at the level of 1,0880
"Bearish" trend has a short-term character, so the volume of trade should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
