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The greenback strengthened against other major currencies after the September FOMC meeting. According to some experts, behind this growth lies the disappointment of investors in the Fed's actions.
The Central Bank gave no hint of introducing new incentives in the near future. The regulator said that it intends to refrain from raising interest rates until the end of 2023. According to FOMC forecasts, inflation will not exceed the 2% target over this period.
It should be noted that the Fed's inflation forecasts reflect a higher return on investment in dollar-denominated bonds than previously expected. It was the impact of the Fed's forecasts on the markets that restored faith in the US dollar and contributed to its purchases. The USD index rose about 0.3% to 93.49 points.
"Many investors sold the greenback ahead of the Fed meeting, expecting ultra-deep statements from the Central Bank. However, the regulator disappointed, and now they can close short positions on the US dollar," WESTPAC strategists believe.
Meanwhile, Bloomberg experts warn that ".. the Federal Reserve did not report anything ultra-deep, so the USD bears, who have accumulated a huge short position in recent months, risk being trapped. A trend reversal may trigger the forced closure of "shorts", which will lead to a sharp increase in the dollar. "
Experts at Barclay said, "Among the important factors for the dollar are the upcoming presidential elections in the United States and financial support for the American economy, the need for which was noted by the head of the Federal Reserve, Jerome Powell. Congress is still negotiating incentives, and markets are waiting for a solution to this problem. "
Fed Chair Powell is not the only one who speaks about the need for new fiscal support measures. This is also evidenced by weak US retail sales figures for the month of August. Sales in the retail control group, which is used for calculating GDP, unexpectedly decreased by 0.1%. The drop in consumer spending appears to be due to the termination of government support programs at the end of July.
After the announcement of the results of the September meeting of the Federal Reserve, the main currency pair reached its lowest level in a month.
At the moment, support for EUR / USD is at 1.1750, which has held back the bears twice in recent weeks. The pair broke through this mark and touched 1.1737, but this breakdown has yet to be confirmed. Further support is located at 1.1700 and 1.1625.
The bearish sentiment will continue as long as the trades are held below 1.1917. This level covers the area of resistance at 1.2014-1.2015.
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