EUR/USD Falls Below 1.1900 as Fed’s Hawkish Signals Boost Dollar
EUR/USD dropped below the critical 1.1900 level after unexpectedly hawkish comments from Federal Reserve officials pushed market expectations for higher US rates. The move broke multiple technical supports, with trading volume at ~150% of the 30-day average and EUR options volatility rising to a three-month high. Major banks revised forecasts and hedge funds increased euro short positions (CFTC data showed ~25% growth). Key US data cited: non-farm payrolls +275,000, CPI at 3.1% YoY, retail sales +0.8% MoM, and Manufacturing PMI 50.5. Fed balance sheet reductions (~$95bn/month) versus continued ECB accommodation widened the policy divergence, supporting Dollar strength. Technical support now sits at 1.1850 and 1.1800; resistance at 1.1900 and 1.1950 (50-day MA). Indicators: RSI ~32, MACD bearish, ATR expanded to 0.0085. Short-term outlook: likely continued dollar strength barring dovish Fed surprises or markedly stronger Eurozone data. Watch upcoming ECB and Fed communications and next US/Euro inflation prints; potential scenarios range from further declines toward 1.1800 to a range-bound 1.1800–1.1950. Traders should monitor support/resistance, options volatility, and interest-rate repricing for risk management.
Bearish
The article describes a clear catalyst—unexpectedly hawkish Fed commentary—that has repriced US rate expectations, widened monetary policy divergence with the ECB, and materially strengthened the Dollar. Empirical signals supporting a bearish view for EUR/USD include: price breaching 1.1900 with elevated volume, a jump in options volatility, hedge funds increasing euro shorts, and technical indicators (RSI near 32, bearish MACD, expanded ATR). Historically, similar Fed-driven tightening cycles (2014–15, 2018, 2022) produced sustained euro weakness. Short-term impact: increased volatility and likely further downside toward 1.1800 if no dovish surprises occur. It also raises cross-asset pressure—commodities like gold tend to fall, and EM currencies may weaken. Long-term impact depends on economic divergences: if US growth/inflation persist and the Fed stays restrictive while ECB remains accommodative, structural tailwinds for the Dollar could prolong euro weakness. Traders should position with tight risk controls, monitor rate-market signals (Fed funds futures), options skew/liquidity, and upcoming ECB/Fed communications as potential inflection points.