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Asset Watch
Wednesday, November 22, 2023
The minutes from the recent Federal Reserve meeting, conducted earlier this month, highlighted a consensus among Open Market Committee members to approach changes in US interest rates cautiously. Any potential rate increases were tied to progress in reaching inflation targets. Discussions also encompassed the impact of elevated interest rates on households and businesses. The market response to the FOMC minutes was muted given that the meeting preceded the release of the US jobs report for October which revealed a weakening labor market, and the October inflation report which indicated a decline in US inflation levels.
As a result, the prevailing sentiment in the markets suggests that US interest rates have likely peaked. Current expectations indicate that potential adjustments in monetary policy pointing would be towards rates cut in the upcoming year. Consequently, the US dollar retreated, losing around 3% of its value since the recent release of the US inflation report. Conversely, stock and commodity markets, including gold, experienced gains. Euro prices also surged, reaching their highest levels in several months.
Chart source ADSS Platform
On November 14, the euro exhibited an uptick against the US dollar, with some traders closing short positions and others initiating longs. Since then, prices have followed an ascending trajectory, establishing higher highs and higher lows.
As of now, the EUR/USD is navigating within a trading zone between 1.0981 – 1.0873. A daily close above the high end of the zone signifies robust upward momentum, potentially propelling prices towards 1.1060. Nevertheless, the resistance level of 1.1020 should be considered.
Conversely, a daily close below the low end of the mentioned trading zone suggests hesitancy among traders to sustain the upward push, possibly prompting sellers to take the initiative and steer prices back towards 1.0789. However, the support level at 1.0831 should be kept in focus.
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