After the weak data on inflation in the US for May reached the beginning of the US session on Wednesday, the dollar fell in the foreign exchange market. However, then, as it became known about the Fed decision on the interest rate, and especially during the Fed's press conference, which began half an hour later, the publication of the Fed decision on the rate (18:30 GMT), the dollar strengthened, recovering losses during yesterday's trading day.
As expected, the Federal Reserve announced an increase in short-term interest rates by 0.25%, and also reported some details of plans to gradually reduce its budget (about 4.5 trillion US dollars). The Fed raised its forecast for economic growth in 2018 to 2%. The inflation forecast for the current year was lowered to 1.6% from 1.9% in March. The Fed is still planning to raise another interest rate increase this year. The probability of such an increase, according to the CME Group, is about 45%.
Today, the dollar continues to increase its positions in the foreign exchange market. The divergence of the directions of the monetary policy of the Fed and other world central banks supports the dollar.
Today, the focus of investors will be the decision of the Bank of England on the interest rate in the UK. It is expected that the Bank of England will keep rates at the current level of 0.25%.
As shown yesterday, the real wage fell by 0.6% compared with the same period last year. The income of the country's population is declining due to a strong inflation rate (about 2.7% in annual terms), which is observed in the UK after the referendum on Brexit.
Consumer spending is an important component of UK GDP growth, and the Bank of England will be very cautious about raising the interest rate.
In the period of publication of the bank's decision (11:00 GMT), the volatility of the pound trade is expected to increase, which, through the EUR/GBP cross-currency pair, may spread to a couple of euros with the dollar.
Of the news for today, it is also worth paying attention to data from the US, which is published during the American trading session (between 12:30 and 14:00 GMT). Among other data - a weekly report of the US Department of Labour, which contains data on the number of initial jobless claims. The result above the expected indicates a weak labour market, which has a negative impact on the US dollar. The forecast is expected to decline to 242,000 from 245,000 for the previous period, which should positively affect the dollar.
EUR/USD, meanwhile, is declining from the opening of today's trading day, breaking through the short-term support level 1.1217 (200-period moving average on the 1-hour chart).
Technical indicators on the 1-hour, 4-hour, daily charts went to the side of sellers.
The immediate goal of the EUR/USD pair decline is support level 1.1165 (June lows). In case of breakdown of the support level 1.1110 (200-period moving average on the 4-hour chart), you can return to consideration of short positions for the EUR/USD pair.
In case of resumption of positive dynamics and return to the zone above the level of 1.1230 (local highs), the EUR/USD will go (within the upward channel on the daily chart) towards recent annual highs near the level of 1.1280 (Fibonacci level 23.8% corrective growth from the lows, Reached in February 2015 in the last wave of global decline of the pair from the level of 1.3900) and further to the level of 1.1340 (144-period moving average on the weekly chart).
Support levels: 1.1165, 1.1110, 1.1100, 1.1080, 1.1000, 1.0950, 1.0890
Resistance levels: 1.1217, 1.1230, 1.1280, 1.1340, 1.1600
Trading recommendations
Sell Stop 1.1160. Stop-Loss 1.1235. Take-Profit 1.1110, 1.1080, 1.1020, 1.1000, 1.0950, 1.0900
Buy Stop 1.1235. Stop-Loss 1.1160. Take-Profit 1.1280, 1.1300, 1.1340, 1.1400, 1.1600
