The EUR/USD pair fell to lows sub parity before bouncing and erasing intraday losses in a volatile session on Thursday, which featured appearances of both central bankers, ECB’s Christine Lagarde, and Fed’s Jerome Powell.
At the time of writing, the shared currency trades at the 1.0000 area, virtually unchanged on the day, oscillating between a low of 0.9930 and a high of 1.0030.
The European Central Bank decided to hike rates by 75 basis points, setting the most significant interest rate increase in the history of the ECB.
During the press conference, Christine Lagarde confirmed that she expects to raise rates in the following meeting to “dampen” demand but that the Governing Council will work meeting by meeting and remain data dependent.
In addition, Lagarde stated that she expects inflation to remain high next year as the ECB upwardly revised its inflation forecasts to an average of 8.1% in 2022, 5.5% in 2023, and 2.3% in 2024.
On the other hand, Lagarde confirmed that she expects the economy to slow down and then stagnate but not slip into a recession as the bank adjusted GDP growth forecasts to 3.1% in 2022, 0.9% in 2023, and 1.9% in 2024.
Meanwhile, Federal Reserve Chair, Jerome Powell, spoke at the Cato Institute’s Annual Monetary Conference and reaffirmed the Fed’s hawkish stance.
Powell assured a strong commitment to bringing inflation down and accepted responsibility for price stability. According to WIRP, the markets are betting on higher odds of a 75 bps increase for the Fed’s next week's meeting of 86.
From a technical perspective, the EUR/USD short-term bias remains bearish, according to the daily chart, although indicators suggest a deceleration of the bearish pressure.
The RSI turned flat below its midline, while the MACD crossed above its signal line on Wednesday and printed modestly higher green bars, indicating a growing buying interest.
On the downside, the 0.9900 area stands as short-term support. Loss of this level would pave the way to retesting the cycle low of 0.9863 and then the 0.9700 area.
On the other hand, to confirm a recovery, the bulls must consolidate above the parity level, targeting the 20-day SMA, currently at 1.0021and the 1.0100 psychological mark.