Federal Reserve Chair Jerome Powell is on record favoring a wait-and-see stance on inflation worries, as he recently testified to Congress. He emphasized the need for careful observation of economic indicators as the Federal Reserve deliberates its next moves in monetary policy. Powell will be testifying again on Wednesday, this time to the House Appropriations Committee. He wants to double down on that “stay alert” message given the state of the economy.
In his testimony, Powell reiterated much of what was said after the most recent FOMC meeting. There, officials opted to raise interest rates again. This decision is clearly a reaction to inflation’s persistence and risks starting to infect measures inflation could pose to the broader economy. The Fed’s wait-and-see approach underscores a determination to avoid hasty conclusions and act only after additional data merits a change in monetary policy.
Alongside Powell’s testimony, the EUR/USD currency pair has seen some impressive fluctuations over the last few days. The pair is currently floating just below a multi-year high of 1.1642. Positive market sentiment and encouraging recent headlines toward a possible ceasefire in the Middle East fuel this upward momentum. Expectations that recently increased tensions in the region will ease have lifted demand for Euro. This dramatic surge is driving up the effective EUR/USD exchange rate.
Tuesday’s EUR/USD rally is a good example of this powerful, resilient buying pressure clearly overflowing in the market. Traders are growing ever more optimistic about the euro’s prospects to go even higher. Recent price action suggests that the pair has further ground to cover to continue its rally. The very short-term EUR/USD daily candlestick chart indicates the pair is testing recent highs. It remains above all major moving averages, forming a highly bullish forecast for the currency pair.
Currently the next support levels for EUR/USD are seen at 1.1600, 1.1560 and 1.1510. On the flip side, resistance is estimated at 1.1660, 1.1700 and 1.1745. The 20 Simple Moving Average (SMA) has skyrocketed and currently is at around 1.1520. This level is an important layer of support for the pair. This moving average very much influences expectations of traders. It guides their planning as they adjust to today’s competitive realities.
Moving forward, Powell’s next testimony on Wednesday will be subject to extreme scrutiny by market participants. Investors are keen to learn more about the Federal Reserve’s mindset on inflation. Beyond the numbers, they are watching nervously for signs of a change in policy mood. We know that economic data is still coming in. How the markets react to the Fed’s commitment to monitor inflation will determine their performance.
The tension between Powell’s strict monetary policy and EUR/USD’s positive uptrend provides traders a mixed playing field. With the backing of technical indicators and positive overall economic signals, the euro looks set to keep rising.