On Wednesday, the US central bank maintained interest rates at 0%-0.25% and the statement noted that it would be "appropriate" to raise them "soon" , with Mr Powell pointing to a March lift-off, saying that "The Committee is of the mind to raise the federal fund rates at the March meeting, assuming conditions are appropriate for doing so" .
He also commented that there is "quite a bit of room to raise interest rates without hurting the labor market."
The central bank reaffirmed that asset purchases will end in early March and published set of principles regarding the process of reducing its balance sheet, but did not provide a specific start date.
Overall, this seemed to us like a rather contained statement and press conference, which were light in specifics. The markets reacted negatively and Mr Powell's aforementioned comment on future hikes, appeared to be the factor that sparked Wall Street decline and US Dollar's rise.
At the time of writing, CME's Fed WatchTool  assigns the highest probability (33.3%) to rates rising at 1.25%-1.50% in December, which would require five 25 bps increases.
The pair dropped after the event and extends losses today to fresh 2022 lows, as monetary policy differential between the US Federal Reserve and the European Central Bank (ECB), remains unfavorable.
It is now exposed to the 2021 lows from November (1.1185), but the next major support at 1.1120-1.1099 may be remote at this stage.
From a purely technical prospective, the move is overextended and this could give the common currency a chance to push back towards mid-1.1200, but a strong catalyst would be required for a break above 1.1285-95 that would ease downward pressure.
Market participants will now turn to Q4 GDP and Durable Goods (13:30) form the United States.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 27 Jan 2022 https://www.federalreserve.gov/monetarypolicy/files/monetary20220126a1.pdf
Retrieved 27 Jan 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20220126.htm
Retrieved 19 May 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#