US Dollar Slips After Fed Rate Hike: What Has Changed for EUR/USD, GBP/USD, USD/JPY?

US Dollar Vs Euro, British Pound, Japanese Yen – Outlook:

• USD slipped after Fed hiked rates, in line with expectations.
• Key focus now shifts to ECB and BOJ meetings.
• What has changed for EUR/USD, GBP/USD, and USD/JPY?

The US dollar slipped but held well within the recent range after the US Federal Reserve hiked interest rates by the widely expected quarter percentage point and on balance kept its options open for further tightening.

Powell’s remarks at the press conference came across as neutral, stopping short of committing either way. Meanwhile, the post-meeting statement was largely unchanged from the previous meeting, still containing the phrase “additional policy firming”, highlighting the slight hawkish tilt. On balance, the key takeaway appears to be the data-dependent/patient approach going into the next meeting.

For the US dollar, the balanced tone provides little cues. However, while risk sentiment remains resilient amid an encouraging start to the earnings season and hopes of additional stimulus from China, USD could stay on the back foot. In this regard, the USD hasn’t been able to recoup the losses triggered by the recent US jobs and inflation data. As long as the market believes US rates are near a peak, the appetite for the safe-haven USD could stay diminished.Meanwhile, key focus is now on the European Central Bank policy meeting (later Thursday) and the Bank of Japan meeting (Friday).

EUR/USD 240-minute Chart

Chart Created by Manish Jaradi Using TradingView

EUR/USD: Holds above crucial support

EUR/USD on Wednesday held above stiff support around an uptrend line from early June, near the 200-period moving average on the 4-hour chart. Still, it would be too soon to conclude that the immediate bearish pressure has alleviated – the pair would need to clear the initial hurdle at Monday’s high of 1.1150. Until then, the bias appears to be of consolidation within a broadly constructive outlook. As highlighted in the previous update, only a fall below the mid-July lows of 1.0825 for the broader upward pressure to ease.

GBP/USD 240-minute Chart

Chart Created by Manish Jaradi Using TradingView

GBPUSD: Bullish pressure is still intact

GBP/USD has managed to rebound from a fairly strong cushion on converged support around 1.2800, including an uptrend line from the end of June, and the mid-June high of 1.2850. A hold above the support was crucial to keep the short-term upward pressure intact. GBP/USD now needs to overcome the initial cap at Thursday’s high of 1.2965 to eliminate any imminent downside risks.

Any fall below Monday’s low of 1.2800 would confirm that the bullish pressure had faded in the near term, potentially opening the way toward the end-June low of 1.2600. Zooming out, the broader bias remains up, with a potential to rise toward 1.4200 in the coming months (see theprevious updatefor more details).

USD/JPY 240-minute Chart

Chart Created by Manish Jaradi Using TradingView

USD/JPY: Growing odds of a false bullish candle

While EUR/USD and GBP/USD remained within the recent ranges, the reaction in USD/JPY was relatively convincing. Wednesday’s fall below immediate support at Monday’s low of 140.75 has raised the odds of a false move higher last week. For more on this, see “US Dollar Scenarios Ahead of Fed Rate Decision: EUR/USD, GBP/USD, USD/JPY Price Setups,” published July 26.

USD/JPY is now testing the vital converged support area at 139.50-140.00. Any break below could confirm that the sharp rebound on Friday above the 200-period moving average on the 240-minute chart was a false one. On the upside, a rise above Friday’s high of 142.00 remains a vital hurdle to clear.

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish