EUR/USD nosedives below 1.0700 on Fed’s hawkish hold; traders eye Powell’s presser

• EUR/USD trades in a volatile 1.0680/1.0720 range after the Fed keeps rates unchanged but signals future tightening.
• Fed’s upward revision of the Federal Funds Rate for 2024 to 5.1% triggers a sharp drop in the EUR/USD pair.
• Pair remains sensitive to Fed Chair Powell’s upcoming remarks, with the daily low of 1.0672 in sight.

The EUR/USD dropped sharply late in the New York session as the US Federal Reserve (Fed) decided to keep rates unchanged at the 5.25%-5.50% range, though it stood to its restrictive stance. Also, the Fed upward revised the Federal Funds Rate (FFR) to 5.1% for 2024, as shown by the Summary of Economic Projections (SEP). At the time of writing, the EUR/USD trades volatile at around the 1.0680/1.0720 area.

Summary of the Federal Open Market Committee decision

The Fed held rates unchanged as expected and kept the door open for additional tightening toward the end of the year. In their monetary policy statement, Fed officials emphasized that “Inflation remains elevated” while acknowledging that economic growth is expanding at a solid pace while the job market remains tight.

Although the monetary policy statement did not change much from the previous decision, Fed officials’ upward revision to interest rates 2024 from 4.6% to 5.1% was the main reason behind the sudden US Dollar strength.

EUR/USD market’s reaction

As newswires crossed, the EUR/USD tumbled below the 1.0700 mark, extending its losses past the R1 pivot point at 1.0706, though shy of testing the daily low of 1.0672. Nevertheless, as the Fed Chair Powell looms, expect the pair to remain trading volatile during the rest of the New York session.

EUR/USD Key Technical Levels