EUR/USD dips below 1.09 as Fed June rate hike odds jump to 93%

The bid tone around the US dollar spiked, pushing the EUR/USD below 1.09 handle as the probability of a rate hike in June as represented by the CME data jumped from 69.6% to 93.8%.

What’s behind the spike in rate hike odds?

The Fed refrained from making any explicit hints towards the June rate hike. Neither did the statement talk about the plans to trim the balance sheet this year. Thus, the spike in the rate hike odds is slightly confusing.

Moreover, it could be attributed to the fact that Fed acknowledged the rise in inflation. The policy statement said the inflation is now running close to the Fed’s 2 % goal.

The spike in the rate hike odds has been accompanied by the jump in the 2-yr treasury yield to 1.302%; up four basis points on the day.

EUR/USD Technical Levels

The pair was last seen trading around 1.0896. The immediate support is seen around 1.0888 (previous day’s low), under which losses could be extended to 1.0852 (Apr 27 low). A daily close below the same would open doors for 1.0775 (Apr 20 high).

On the higher side, the first resistance is seen at 1.0991 (weekly 100-MA) ahead of 1.1039 (Oct 20 high) and 1.11 (psychological resistance).