FX.co ★ More Fed policymakers support idea to keep key rate unchanged

Yesterday's statements by Federal Reserve officials, especially those provided by Governor Michelle Bowman, were widely appreciated by buyers of the US dollar, who had long waited for new signals from the regulator regarding monetary policy.

Bowman repeated that inflation would continue to fall if interest rates remained at current levels. He also said it was too early to start cutting rates. In her view, we need to continue to closely monitor incoming data to assess the appropriate path for future policy. That said, Bowman noted several risks that could add to inflationary pressures, including the impact of geopolitical conflicts, weakening financial conditions and ongoing labor market tensions.

"Should the incoming data continue to indicate that inflation is moving sustainably toward our two percent goal, it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive," Bowman said in prepared remarks to the Florida Bankers Association. "In my view, we are not yet at that point," she continued, adding that "a number of important upside inflation risks remain."

In her comments on monetary policy, which are very similar to statements made by other Federal Reserve officials earlier this month, Bowman warned that cutting interest rates too early could lead to the need to raise them again in the future. "I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," she said.

Notably, in recent weeks, many Fed officials have started hinting that a rate cut would be a good idea to postpone, supporting a cautious and slow approach.

An aggressive rise in rates in 2022 and 2023 has already brought a reasonably good result, as inflation has moved closer to, but not yet reached, the 2.0% target. However, even now that price pressures are easing and the economy is still strong, Fed officials are not ready to cut rates, trying to postpone this moment as late as possible to finally get the committee's objectives accomplished. This is now the main reason why the US dollar is in demand when paired with several risky assets, such as the euro and the British pound.

As for the current EUR/USD technical picture, the euro is still in demand. Now buyers need to think about taking control over the 1.0860 level. Only this will allow them to test 1.0890. From there, it is possible to climb to 1.0930, but doing so without support from major traders will be quite challenging. The farthest target is seen at a high of 1.0965. If the trading instrument declines only around 1.0820, I expect serious action from big buyers. Otherwise, it would be wise to wait for an update of the low of 1.0790 or open long positions from 1.0760.

As for the current technical picture of GBP/USD, bulls need to take the nearest resistance at 1.2680 to develop the uptrend. This will allow them to target 1.2710. However, it will be quite difficult to break above this level. The furthest target will be 1.2740, after which we can talk about a sharper upward movement to 1.2780. If the pair falls, bears will try to take control of 1.2660. If they manage to do so, a breakdown of the range will deal a serious blow to bulls' positions and push GBP/USD to the 1.2630 low with the prospect of falling to 1.2590.