EUR/USD is set to drop to 1.1700 after hawkish Fed – ING
- The EUR/USD has been in a sharp downward trend in the past few days.
- The pair’s decline accelerated after the hawkish Fed decision.
- Analysts at ING believe that the pair will keep falling to 1.1700.
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The EUR/USD is on track to drop by 1.52% to 1.1700, according to analysts at ING. The pair is trading at 1.1885, which is more than 3% below the highest level this year.
Euro to drop further
The EUR/USD crashed last week as investors reflected on the Federal Reserve interest rate decision. In it, the bank decided to leave interest rates unchanged in the range of 0% and 0.25%. The bank also pledged to keep its $120 billion per month asset-purchases program intact.
The most notable change in the statement was that the Fed signaled that it will start increasing interest rates in 2023, earlier than the expected 2024. As such, investors believe that the bank will soon start tapering its asset purchases. The bank signaled that it was comfortable leaving policy intact in the previous statements, saying that the ongoing recovery was transitory.
Looking ahead, the EUR/USD will react to the latest testimony by Christine Lagarde today. The ECB president will talk about the state of the Eurozone economy now that the Delta variant of the virus has started to spread. She will also likely respond to last week’s Fed decision.
Jerome Powell, the Fed Chair, will also testify in front of Congress on Tuesday and Wednesday. Historically, his testimony tends to move the US dollar and American equities on his first day of testimony. Other important numbers that will move the EURUSD this week will be the US housing starts and the flash manufacturing and services PMI numbers. The pair will also react to the latest US GDP, durable goods, and initial jobless claims numbers.
In a note, analysts at ING believe that the pair will keep falling after the recent Fed and ECB decisions. They wrote:
“EUR/USD is consolidating after last week’s heavy sell-off and we expect to see an environment of shallow corrections and new lows. The direction of travel looks to be to the March low at 1.1700, barring the Fed somehow rowing back on hawkish sentiment.”
EUR/USD technical forecast
The EUR/USD pair has been in a sharp downward trend in the past few sessions. It has managed to move from 1.2265 to 1.1887. It has also moved below the 61.8% Fibonacci retracement level and the 25-day and 15-day moving averages. The Relative Strength Index (RSI) is also below the oversold level of 30. Therefore, the pair will likely keep falling as bears target the next key support at 1.1700.
