EUR/USD hits one-week high despite Fed's upward revision of estimated neutral rate

• The USD is being offered in Asia as Fed was not as hawkish as many had expected.
• EUR/USD clocks one-week high, challenges key trendline hurdle.
• Focus on US tariffs action against China.

The new Fed chair Powell must be happy with the way FX markets have reacted to the central bank's 25 basis point rate hike and an upward revision of the estimated neutral Fed funds rate.

After all, the greenback is being offered against most majors in Asia. The EUR/USD pair is trading at a one-week high of 1.2369 and looks set to take out the descending trendline (drawn from the Feb. 19 high and March 8 high).

Fed was less hawkish than expected

The greenback traded on the front foot ahead of the Fed decision as investors were expecting the central bank to revise higher the 2018 dot plot to four rate hikes. However, the Fed kept the median forecast of three rate increases in 2018.

Further, Powell expressed caution on inflation and called for stronger wage growth and productivity. Kathy Lien from BK Asset Management says, "Unlike his semi-annual testimony on the economy, today's press conference was not unambiguously hawkish and for that reason alone, investors were unimpressed and returned to selling dollars".

Focus shifts to trade wars

President Trump is scheduled to sign a memo at 12:30 p.m. EDT (1630 GMT) on Thursday imposing tariffs on Chinese imports in a move aimed at curbing theft of US technology.

The rumors are doing the rounds that China will likely retaliate with its own set of targeted tariffs, thus leading to a full-fledged US-China trade war and a further drop in the USD.

EUR/USD Technical Levels

A break above 1.2413 (March 14 high) would expose 1.2446 (March 8 high). A close higher would signal resumption of the rally from the March 1 low of 1.2154 and could yield re-test of 1.2556 (Feb. 16 high).

On the downside, a close below 1.2241 (previous day's low) would revive the bearish view and allow a stronger decline to 1.2154 (March 1 low) and 1.2089 (Jan. 4 high).