20.02.201910:40 Forex Analysis & Reviews: What to expect from the Fed protocols: the Fed will not raise rates and stop the balance reduction

While traders and economists are preparing to begin studying the minutes of the January meeting of the Federal Reserve System, the speeches of the Fed representatives will help determine the course of the committee's future policy at the beginning of this year.

Yesterday, Cleveland Fed President Loretta Mester said that if the economy met expectations, the rates may have to be slightly raised. However, at the moment, the Fed's policy is not far behind the development of the situation in the economy, and is not much ahead of it, which gives time to gather additional information before making further adjustments to the policy.

Mester is confident that at the upcoming meetings, the Fed will make final adjustments to the plans for completing the reduction of the balance sheet, which is also likely to outline prospects for interest rates. If the committee declares about the suspension of the balance reduction, it is likely that monetary tightening will be suspended. Loretta Mester considers the delay in the reduction of the balance of the Fed by the end of the year acceptable.

At the end of the presentation, the representative of the Fed noted that currently, the US economy is facing counter-currents and obstacles, but the growth is likely to continue, which will allow us to expect good results for the end of 2019

As for the fundamental statistics, which was published yesterday in the afternoon, attention was attracted only by the report on the indicator of the sentiment of housing builders in the United States in February of this year, which rose again.

According to the National Association of Home Builders NAHB, the housing market index in February rose to 62 points against 58 points in January. Economists had expected the index to be 59 points in February.

The rise in sentiment is directly related to the recent decline in mortgage rates after the Fed's suspension of the policy of raising interest rates, as well as to the good state of the labor market, which affects the mood of the builders. Last week, the average rate for a 30-year fixed-rate mortgage loan was 4.37% against a recent high of 4.94%.

As for the technical picture of the EURUSD pair, further growth will directly depend on the Federal Reserve protocols, which will be published today. If traders find nothing interesting in them, and the prospects for further increases in US interest rates remain unclear, the pressure on the US dollar may increase, which will support risky assets in the short term. This may lead to a breakthrough of resistance 1.1355 and a further increase in EURUSD in the area of highs 1.1400 and 1.1440.

In the case of a downward correction, and as we can see on the chart, before each new wave of euro growth there is a sharp depreciation, large levels of support are viewed in the 1.1315 and 1.1280 ranges.