EUR/USD Falls On Powell’s Comments

The EUR/USD fell during the New York session, on Federal Reserve Chairman Jerome Powell’s remarks in a testimony before the Senate Committee on Banking and Housing.

At the beginning of the Q&A session, the EUR/USD pair was trading around the 1.1370s but plummeted to 1,1240s on remarks of Jerome Powell.

Jerome Powell said that higher prices are related to supply-demand issues, reiterating that price increases have spread more broadly. Powell noted that the risk of higher inflation has increased and “it is time to retire the word Transitory when talking about elevated prices”.

Regarding faster QE’s reduction, he said that it is “Appropriate to consider wrapping up taper in a some few months sooner”, and that he “will talk about speeding up taper at the coming Fed meeting.” He added that recent data showed elevated inflationary pressures, rapid labor market improvement, and strong spending.

When he was asked about the COVID-19 omicron variant, he said that he “will know within a week or 10 days, can only assess the impact on the economy then.”

The 1-hour chart leaves us with a 130 pip sizeable bearish candle on the remarks of retiring the “T” word for inflation. The price plunged through the R3, R2, R1, central daily pivot, S1, and found support around the S2 area at 1.1233, where it bounced towards 1.1270.

EUR/USD bulls are having a tough time, trying to break above the 200-hour simple moving average (SMA) at 1.1270. Meanwhile, EUR/USD bears, on the other side, are battling the 100-hour SMA at 1.1261, at the confluence of the S1 daily pivot.