- EUR/USD was down by 0.4 Percent in the last week, after disappointing Fed minutes.
- Weekly fall after surging for eight consecutive weeks.
- Focus on the Fed President’s speech this week.
The president of the Fed Reserve, Jerome Powell, will be speaking at this week’s Jackson Hole Symposium on the bank’s monetary policy framework review.
EUR/USD Weak after Multi-week run-up
The dollar bears were disappointed after the Fed minutes released on last Friday remained mute on the yield curve control. The disappointment helped the dollar to bounce back from oversold levels. The dollar strength also ended an eight-week rally in the EUR/USD.
On Friday, the pair formed a bearish engulfing candle confirming bearish divergence in the 14-day relative strength signal on Wednesday. A short-term bearish reversal is also seen in the daily chart indicators.
The Fed had repeatedly ruled out negative rates and yield curve control as policy tools to revive the economy. The central bank had earlier cut rates to record lows and launched stimulus programs in a never-before scale.
Now, the Fed has only two options to support the economy – increase bond purchases and allowing more room for inflation, or both. The available options mean the central bank might keep the interest rates at low levels even after the inflation stays above the targeted level of two Percent.
If Powell in his speech indicates a growing consensus for higher inflation tolerance, it will trigger a sell-off in the US dollar. The traders will, therefore, watch his words very keenly.
US core PCE Deflator, Personal Spending and Personal Income numbers scheduled for release on Friday are the other critical data for this week.
Today’s economic docket is thin in Europe and the US; hence market participants will move according to the broad sentiments. The S&P 500 futures recorded new highs during the Asian session, and the risk-on mood might help the EUR/USD pair.
