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EUR/USD Sinks as FOMC Minutes Show Threat of Fed Tapering

EUR/USD Sinks as FOMC Minutes Show Threat of Fed Tapering

Rich Dvorak, Analyst

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EUR/USD PRICE OUTLOOK: US DOLLAR STRENGTHENS AS FED MEETING MINUTES HINT AT TAPER TALKS

  • EUR/USD price action just plunged 30-pips to session lows as the US Dollar strengthened
  • FOMC minutes hinted that taper talks could start at upcoming Federal Reserve meetings
  • Renewed fears of Fed tapering sends the broader US Dollar and Treasury yields surging
  • Visit the DailyFX Education Center or check out this EUR/USD trading guide

EUR/USD price action just pivoted sharply lower during afternoon trade on Wednesday as markets digested the latest FOMC minutes. The US Dollar is strengthening sharply in response to fresh Fed taper fears as “a couple” of officials hinted at the “risks of inflation pressures building up to unwelcomed levels.” Some Fed officials also noted how they were worried about the levels of market risk taking.

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EUR/USD PRICE CHART: 15-MINUTE TIME FRAME (19 MAY 2021 INTRADAY)

EURUSD Price Chart US Dollar Fed FOMC Minutes Taper

Chart by @RichDvorakFX created using TradingView

The corresponding influx of US Dollar strength due to fresh Fed taper fears sent EUR/USD dropping by more than 30-pips to session lows. US Dollar buying pressure came alongside a spike in Treasury bond yields with the ten-year rising over 4-basis points. That said, the Fed echoed how it “would likely be some time” until the economy makes substantial further progress toward its policy goals before warranting a move to taper asset purchases.

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% -10% -5%
Weekly 3% -1% 1%
What does it mean for price action?
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A number of FOMC officials suggested, however, that it might be appropriate to begin discussing a plan for adjusting the pace of asset purchases at upcoming Federal Reserve meetings if the economy continues to make progress toward its maximum employment and price stability goals. This stands to keep the US Dollar in demand and EUR/USD price action under fire if the risk of Fed tapering continues to gain more traction. The upcoming release of US PMI data, which is outlined as a high-impact risk event on the DailyFX Economic Calendar, could intensify the Fed taper debate with more evidence of not-so transitory inflation amid persistent supply chain disruptions.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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