Tatsiana Ketrar
Today, on May 22nd, the common European currency keeps on trading within the scope of a narrow price range close to 1,3670. At this point, the currency pair has already declined a little bit. The decline was equal to 0,1% and took place after the Fed published its meeting minutes.
The minutes failed to reveal any unexpected information. Therefore, there was no sharp volatility hikes among dollar pairs, Market Leader reports. The minutes were published yesterday, around the end of yesterday's American trading session. The report confirms that the FOMC members spent a lot of time discussing interest rates. In particular, they were focused on future interest rate hikes. The economic forecasts for the US economy turned out to be favorable, which led the participants to believe that it is necessary to continue the tapering of QE3 at the same pace.
At the same time, they also discussed asset management strategies. At this point, the Fed's asset portfolio is estimated at $4300 billion, not to mention the reserves poured into the US banking system (equal to $2600 billion). Still, market participants are still anticipating a earlier-than-expected interest rate hike.
The American session showed no considerable volatility. The US stock market recovered a bit after 2 consecutive bearish sessions. The minutes didn't influence the market a lot since there was no key change in the Fed's policies.
Despite the fact that the negative correlation between US stock indices and the US dollar is broken, the meeting minutes didn't influence the indices but managed to drop the American currency against other majors a little bit. Gold and other safe-haven assets also start losing value since the Fed's meeting minutes contained the confirmation that the US economy keeps on recovering, which reduced the need for safe-haven assets.
At the same time, the debt market is showing an increase in the 10-year US bond yield – from 2,53% up to 2,56%, which later made the US Dollar regain some of the lost ground against the common European currency.
EURUSD Prospects
Today, on May 22nd, the US Dollar traded higher against the Euro right in advance of the European trading session, Masterforex-V Academy reports. The experts say that is currently trading close to 1,3665 after a 0,1% drop. The current weakness of the Euro currency is confirmed technically since the price has already crossed the line and found itself at the other side of the MF sloping channel (marked blue). We are likely to see the price forming a «double top».
A further downswing is probable if the price breaks and consolidates below 1,3672 and then does the same with 1,3635. If this is the case, the price may well go further down to met with MF pivot 2 located at 1,3550. The scenario is represented by the blue arrow.
Alternatively, the common currency may rise against its US counterpart if the price succeed in consolidating above 1,3672 to hit 1,3732. A break above the MF sloping channel will give way to 1,3774. The scenario is represented by the green arrow.
Tatsiana Ketrar
