Fed Rate Resistance: Latest on USD, GBP/USD, and EUR/USD

Market indifference to Fed rate resistance persists, as evidenced by developments in GBP/USD and EUR/USD, as analysts foresee a March 2024 rate cut.

Analysis of GBP/USD and EUR/USD Prices:

The first anticipated US rate cut is expected in March 2024, resulting in minimal movement among US dollar pairs in the current low-volume trading environment.

Several Federal Reserve officials have expressed concerns about what they perceive as overly aggressive market expectations, projecting up to six quarter-point interest rate cuts in the coming year. Williams and Bostic initiated this sentiment last Friday, stating that discussions about interest rate cuts were not occurring. Moreover, Cleveland Fed President Loretta Mester added to this narrative by suggesting that markets were preemptively pricing in rate cuts. Chicago Fed President Goolsbee further emphasized that market interpretations may not align with the actual statements from the Federal Reserve.

Fed Rate Resistance: Latest on USD, GBP/USD, and EUR/USD

The latest data from CME Fed Fund rate probabilities indicates a 150-basis-point rate cut by the US central bank next year, with the initial 25-basis-point reduction anticipated at the March FOMC meeting.

Despite this, US Treasury yields persist near multi-month lows, with the 10-year benchmark remaining below 4% and the 30-year-long bond showing signs of breaking below the same threshold.

The US dollar continues to face downward pressure as government bond yields decline, preventing the US dollar index from recovering recent losses. The dollar index’s pattern of lower highs and lower lows suggests a potential retracement to the 78.6% Fibonacci level at 101.17 shortly.

Two major US dollar pairs, EUR/USD and GBP/USD attempt modest upward movements. However, thin market conditions limit significant shifts. GBP/USD strives to surpass the 1.2700 level after rebounding from the 38.2% Fibonacci retracement at 1.2628, with resistance expected at 1.2794.

EUR/USD is currently finding support from all three simple moving averages, having cleared the 20-day simple moving average at the end of the previous week. Initial support for the pair lies at 1.0876, coinciding with the 23.6% Fibonacci retracement at 1.08645. Anticipate resistance between 1.1000 and 1.1017.

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