EUR/USD jumps above 1.05 on Fed’s ‘recursive backtracking’

Offered tone around USD gathered pace in Asia, pushing the EUR/USD pair to a session high of 1.0540 on signs the Fed is backtracking from its hawkish view in December.

Strong dollar is a risk - Fed minutes

Fed minutes released in the overnight trade showed the policymakers are worried about the disinflationary impact of the strong US dollar. Furthermore, the minutes also revealed that many policy makers have assumed ‘Trump would walk the talk’ - tax cuts, fiscal stimulus. 

This is a risky gamble, which also suggests the Fed would not mind delaying the next rate hike if Trump under delivers.

Moreover, the minutes appear to have set-in motion the ‘recursive backtracking’ from the December’s hawkish view. Similar backtracking was seen post the December 2015 rate hike as well.

EUR/USD Technical Levels

The spot was last seen trading around 1.0520. A break above 1.0552 (Nov 30 low) would open the door to 1.06 (zero figure) and then to 1.0657 (50-DMA). On the other hand, a failure to hold above 1.05 (zero figure) would shift risk in favor of a drop to 1.0464 (10-DMA) and 1.04 (Dec 16 low).