During the last trading sessions, the currency pair EUR/USD has gone on a flat path. This stability is indicative of the market’s reticence, following the Federal Reserve’s ultra-dovish comments. On Wednesday, the duo continued their charge, as investors continued to digest Fed Chair Jerome Powell’s “wait-and-see” admonitions. His message was simply not enough to reassure an increasingly jittery market, causing more fear and uncertainty.
The EUR/USD pair, as neutral as it gets, has hardly moved since the Fed announcement yesterday. Analysts said the Fed’s failure to provide explicit direction resulted in a mass of confused traders. As such, the pair bounced around in a random fashion without any clear indication of which way it was headed. The uncertainty has already led observers to wonder what the Fed will do next as it steers through the stormy waters of a complex economic future.
Meanwhile, the AUD/USD came alive on Wednesday with impressive swings. After previously breaking out above the significant 0.6500 level, it pulled back dramatically after, even retesting the lows in the lower 0.6400s. This retreat is a reminder of the volatility at play in the forex market. While mostly external factors such as commodity prices and other global economic indicators continue to be fundamental in driving its movements.
The day’s news was the latest in a sea of mixed signals on the inflationary front and overall economic recovery taking shape. The market was looking for the Fed to come out more hawkishly. Powell’s testimony showed that the Fed remains on the dovish side of a generally hawkish monetary policy. Uncertain traders have turned cautious, resulting in a half-hearted bullish-mixed sentiment among market participants. This uncertainty is especially driving their bearish calls on the EUR/USD and AUD/USD currency pairs.
The EUR/USD is just trading back and forth, lacking any conviction. Market participants are intensely focused on the next round of economic data releases in hopes of learning more. Given the current backdrop, the relationship between U.S. economic data and European monetary developments will more or less decide the next direction for both currency pairs.