EURUSD New lows following Jerome Powell's hawkish speech

The dollar has been strengthening against the major currencies since

Jerome Powell's press conference last night. The EURUSD is falling back

to a near two-month low this morning after the Fed Chairman decided to

take a slightly more hawkish stance, while not indicating anything very

new from the December meeting.

As expected, monetary

policy remained unchanged, except for the end of QE which was announced

for early March instead of late March. Nevertheless, Powell left the

pace of normalization of monetary policy unclear, which does not seem to

have pleased risky assets. In response to a reporter's question, the

chairman left all options on the table to counteract "more persistent

than expected" inflation.

The Chairman even left the

door open for a rate hike at each meeting, seven by the end of the year,

while the Fed usually raises rates at the last meeting of each quarter

(up to four per year).

The most likely scenario for Fed

policy normalization is now a first-rate hike in March, a second in

June, the start of the balance sheet reduction (QT) process by this

summer, a third and possibly a fourth by year-end.

The

Fed's hawkish rhetoric was evident in the jump in the dollar and bond

yields and the fall in gold and risky assets. In addition, rate hike

expectations increased and the probability of a 50-basis point rate hike

in March, the equivalent of two rate hikes, climbed to 20% after

Powell's speech.

From a technical perspective, the

EURUSD price has broken out of the bottom of the ascending channel in

which it has been trading for almost two months and its Bollinger Bands,

which are signals that pave the way for a continuation of the basic

uptrend that we have been experiencing for almost a year.

 (Chart Source: Tradingview 27.01.2022)

The

EURUSD has continued its downtrend breaking through last year's low of

$1.1186. The next target in the short term will likely be the symbolic

threshold at $1.10 in the coming weeks.

The next catalysts to follow will be the US household income and consumption data releases on Friday.

Disclaimer:

This material has been created for information purposes only. All views

expressed in this document are my own and do not necessarily represent

the opinions of any entity.