According to the results of the June FOMC meeting, the USD index updated the minimum levels for the last three months, declining to the area of 95.7 points.
As follows from the updated Fed point chart, the regulator does not plan to raise interest rates until at least the end of 2022.
The fact that the market will have access to cheap money for another eighteen months is bad news for the greenback, as the flow of liquidity suppresses the yield of treasuries and reduces the demand for safe-haven assets.
The EUR/USD pair reached a three-month peak, rising above 1.1400 as an initial reaction to the results of the June meeting of the Federal Reserve.
However, Fed Chairman Jerome Powell explained why the regulator is not even thinking about raising rates. He spoke about the American economy, which was seriously affected by the coronavirus, a high level of uncertainty, and also expressed doubts about the positive report on the US labor market for May.
If initially the "dovish" tone of the Fed's statements was enthusiastically accepted by investors who continued to enthusiastically sell the greenback in anticipation of increasing the dollar mass, then J. Powell's comments made market participants look at USD prospects differently.
Recently, the dollar has acted as a protective asset precisely in connection with the COVID-19 pandemic and with focusing on the American economy as more reliable and robust. Since the end of May, the USD index has declined from levels above 100 points, largely due to signs of overcoming the consequences of the pandemic. However, the Fed's pessimism undermines hopes for prosperity in the near term. Therefore, it may be too early to write off the dollar. At least its upward correction is on the agenda. From a technical point of view, this assumption can be confirmed if the USD index overcomes the level of 97 points, which can lead it to the area of 98-98.5 points.
However, even despite the pessimistic comments of J. Powell, the euro has two advantages over the greenback.
First, the Fed Chairman insists on continuing government stimulus to the US economy. Although he did not go into detail, we are likely talking about several incentive programs that will end at the end of July. While Republicans may eventually agree to continue supporting the economy, they are not eager to take such a step at the moment.
Also, the "mean four," represented by Austria, Denmark, the Netherlands, and Sweden, seems to have softened somewhat over the EU's ambitious stimulus program, which supports the euro.
The second favorable factor for the single European currency is that the epidemiological situation in the Old World continues to improve, allowing the region to cautiously return to normal life.
Meanwhile, in the US, COVID-19 incidence rates are rising in California and Texas. Florida is also a concern. Accordingly, in America, restarting the economy may face serious obstacles.
In general, the fundamental picture is in favor of the euro, and this is different from what it was in March and April.
Technically, the EUR/USD pair, which has experienced a nearly 5% rally in recent weeks, looks overbought and vulnerable to a pullback. It can retreat to support at 1.1290-1.1300 and further in the direction of 1.1240, 1.1200, and 1.1180.
The nearest strong resistance is near 1.1375. The pair may try to break it and return to 1.1400. Further purchases will confirm the "bullish" breakdown of this barrier and clear the way for EUR/USD to retest annual highs near 1.1500.
