US Dollar Outlook Post Fed Decision: EUR/USD & GBP/USD

Regarding the quantitative tightening program, the Fed announced it would significantly curtail the scheme by which it is shrinking the size of its portfolio of assets. Starting next month, the amount of Treasuries allowed to roll off the balance sheet when they mature will be cut from $60 billion to $25 billion. This came as a surprise, with many bond dealers expecting a smaller taper.

Want to know where the U.S. dollar may be headed over the coming months? Explore key insights in our second-quarter forecast. Request your free trading guide now!While Powell did highlight a high threshold for easing and noted that it would probably take longer than initially envisioned to pivot to a looser stance, he made it sound like the bar for resuming hiking borrowing costs is even higher.

Against this backdrop, the U.S. dollar could trade sideways or with a slightly negative bias in the near term, although its prospects will also depend on the relative stance of other key central banks, such as the ECB and the Bank of England.rallied on Wednesday, edging closer to reclaiming overhead resistance at 1.0725. Bears must staunchly defend this ceiling to thwart the momentum from picking up; a failure to do so might trigger an advance towards 1.0755.

On the flip side, if sentiment shifts in favor of sellers and prices head back below 1.2515/1.2500, support is expected to materialize around 1.2430. To stave off a more pronounced selloff, bulls must tenaciously protect this floor; any lapse could precipitate a swift market downturn towards 1.2305.Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors.

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