EURUSD correcting downward

Yesterday, the minutes from the Fed's October 31-November 1 meeting were released.

The key point is that Federal Reserve officials at their most recent meeting expressed little appetite for cutting interest rates anytime soon, particularly as inflation remains well above their goal, according to minutes released Tuesday.

All the public hype about the possibility of policy easing was only caused by Powell's rhetorical question of are they going too far on the rate hike issue.

The summary of the meeting showed that Federal Open Market Committee members still worry that inflation could be stubborn or move higher, and that more may need to be done. At the least, they said policy will need to stay “restrictive” until data shows inflation on a convincing trek back to the central bank’s 2% goal.

“In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the minutes said.

The release comes amid overwhelming sentiment on Wall Street that the Fed is done hiking. The market expects that the Fed will enact the equivalent of four quarter percentage point cuts before the end of 2024.

However, the minutes gave no indication that members even discussed when they might start lowering rates.

The Fed's benchmark funds rate, which sets short-term borrowing costs, is currently targeted in a range between 5.25%-5.5%, the highest level in 22 years.

The Fed’s key inflation indicator, the personal consumption expenditures price index, showed core inflation running at a 3.7% 12-month pace in September. The number has improved considerably, dropping a full percentage point since May, but is still well above the Fed’s target.

It is likely that after the minutes are published, there will be some reassessment of the market's prospects, and the bullish sentiment, particularly in EURUSD, will cool down a bit. Moreover, EURUSD has formed technical conditions for downward correction.

The Overall Recommendation is to sell EURUSD with profit taking at 1.078. Possible loss should be fixed at 1.099.