EUR/USD rebounds sharply as USD reverses after FOMC meeting

• USD trimmed gains after rising sharply following Fed rate hike and FOMC forecasts.
• EUR/USD rebounded from 1-week low to a fresh daily high.

The EUR/USD pair bottomed at 1.1724 and then climbed to the 1.1800 area. The pair peaked at 1.1799, hitting a fresh daily low. Then pulled back modestly, and it was hovering around 1.1780, moving without a clear direction.

The greenback soared across the board immediately after the release of the FOMC statement. The rate hike from the Fed was already priced in but the updated projections signaling two more rate hikes boosted the greenback. At the beginning of Powell’s press conference EUR/USD bottomed at 1.1724.

The pair then rebounded as the US Dollar pulled back significantly. The FOMC pointed out that the speed of rate hikes could rise but the terminal rate remained unchanged that could mean that the rate hike cycle could end sooner than expected. Another potential reason behind the US Dollar bounce is a “buy the rumor, sell the fact” behavior.

EUR/USD continues to move in the range of the last four trading days between 1.1810 and 1.1725. Despite the increase in volatility, it remains firm inside the range.

Now attention turns to the European Central Bank. The Governing Council meets on Thursday. No change is expected but the statement and Draghi’s words could have a significant impact on expectations and on the euro.

EUR/USD Technical levels

Resistance levels could be seen at 1.1810 (Jun 12 high), 1.1840 (Jun 7 high) and 1.1870. On the downside, immediate support is now seen at 1.1765 followed by 1.1720/30 (Jun 8 & 13 low) and 1.1705.