Fed Chairman Jerome Powell said yesterday that continued economic growth, a robust labor market and inflation which remains above the 2% target indicate that the Fed has no need to rush to cut interest rates.
He noted that borrowing costs are likely to remain high for a longer period of time either for households or businesses. Powell confirmed that along with his colleagues, he still believes inflation is “on a steady path towards 2%,” allowing the US central bank to shift monetary policy “to a more neutral condition over time,” which should not slow the economy.
But as to what that neutral rate might be under current circumstances and how quickly the Fed might try to reach it is still questionable, especially given the central bank's view on the impact of the new Trump administration's policies, including the issues of raising tariffs and changing immigration policy.
Powell largely evaded questions about how new import tariffs or running the economy with fewer workers might alter the path of inflation, which the central bank is trying to bring down.
He said that at this point the economy is not showing any distress signals to prompt the Fed to accelerate rate cuts and, by contrast, “if the data allows us to move a little slower, that seems a smart thing to do.”
Fed officials and investors are weighing how continued US economic strength and uncertainties about the economic agenda of incoming President Donald Trump's administration, particularly with regard to tax cuts, higher tariffs and tougher immigration policies, could affect both economic growth and inflation.
Technically, EURUSD is in a strong oversold zone on the daily timeframe driven by a stronger dollar. In an ideal scenario, Powell's comments should support the EURUSD downward momentum, but it is more likely that at this point they will bring more volatility as a technical correction upwards. It should be noted that there are several local lows above the current price, which have been broken downwards and will now act as anchors for the price.
The overall recommendation is to buy EURUSD.
Profits should be taken at the level of 1.0600. A Stop loss could be set at the level of 1.0430.
The volume of the opened position should be set in such a way that the value of the possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
