The dollar’s rise turned out to be short lived. On Wednesday evening, the EURUSD pair shed 1%, dropping to 1.188, but the dollar lost ground against the other currencies in the US dollar index, bringing the DXY back below 92 points. The reaction to the Fed’s meeting was emotional. However, Janet Yellen didn’t actually say anything new. She talked about the possibility of an additional rate hike before the end of the year and the beginning of the balance sheet taper in October. Markets digested this information, and within 2 days, the EURUSD pair had almost completely closed the gap, returning to 1.198.
This year, traders have tended to prefer the euro and European stocks. Since the start of the year, the EURUSD has risen by 15%. The European economy has clawed its way out of crisis (attested to by growth in GDP figures and business activity indices), and there are currently no disruptions expected (Brexit is going smoothly, and the French and Dutch elections were free of surprises). The ECB is now looking to gradually reverse its stimulus program.
Today, trader attention will be turned towards Theresa May and her Brexit speech in Florence. Germany is holding parliamentary elections on the 24th of September with no surprises expected as Angela Merkel looks set to win a 4th term in office. These developments could have an influence on currency trading.
If we see growth on the dollar in the next few months, it’s likely to be sporadic. These intervals can be used for purchasing the EURUSD pair. The closest targets for bulls is around 1.23 – 1.25.