It has been a volatile session for the EURUSD currency pair on Thursday as both economies’ central banks delivered their interest rate decisions. While there were no surprises in the decisions made, the market reaction was one of intense fluctuation, as the currency pair eventually gave into the selling pressure, forcing a significant contraction. 

The Federal Reserve on Wednesday delivered a 25bps hike, in line with the market’s expectations, while leaving the door open for another hike in September. However, the market priced in a potential end to the hiking cycle, causing the greenback to lose some ground. In response, the ECB also stuck to its guns for another 25bps hike, signalling that future decisions will be data-dependent. The market reacted in a dovish fashion, while the greenback found support from quarterly GDP Growth statistics, which indicated a 2.4% expansion, a pleasant surprise from the prior 2% and exceeding the expectations of a slowdown to 1.8%.  

Technical 

On the 4H chart, a descending triangle experienced a temporary breakout but met resistance at $1.1145, where the 50-day moving average converged with the Fibonacci midpoint from the Tuesday dip. The price action now retests the breakout point of the channel, which could be critical in the direction of the trend as we advance. 

The market has broken down support at $1.1050 (S1) and $1.1021 as the bearish pressure heads toward lower support. The longer-term downtrend could be confirmed with a breakdown at $1.0973, where lower support is established at $1.0941. 

However, a daily close above $1.1021 could set the currency pair up for a correction of the intraday selloff. In this case, S1 and the pivot point at $1.1077 could resist an additional leg higher, where the 38.2% Fibonacci retracement lies at $1.1112. The midpoint and Fibonacci golden ratio could be potential levels of interest in that case, at $1.1145 and $1.1170, respectively, in the longer term.  

Summary 

Volatility was present in the Thursday session as the market reacted to the latest interest rate developments. The EURUSD currency pair was under immense selling pressure after the ECB decision and stronger-than-expected data from the US, with support at $1.1050 under threat of a sustainable breakdown that could lead the pair lower toward $1.1021 and $1.0973.  

Sources: Koyfin, Tradingview