EUR/USD remains bid around 1.1260; 10-yr yield hovers at 2.12% on Fed’s hawkish rate hike

The American dollar fails to find takers after the Fed hiked rates by 25 basis points as expected and also surprised markets by keeping alive the hopes of another rate hike this year. The EUR/USD trimmed gains slightly to trade around 1.1260. The 10-yr treasury yield remains around to 2.12%; now down 8 bps on the day.

After the dismal inflation data released earlier today, the markets were expecting the Fed to signal a slower rate hike path. However, the Fed has disappointed the doves. The bank has also unveiled plans to trim its $4.5 trillion balance sheet.

The focus now shifts to what Yellen has to say about the economy, inflation and the timing of the next rate hike. It will be interesting to see if the Chairman offers insights into how the central bank intends to unwind its $4.5 trillion balance sheet.

EUR/USD Technical Levels

A break above immediate hurdle of 1.1327 (Sep 8 high) would open up upside towards 1.1366 (Aug 8 high) and 1.14 (zero levels). On the other hand, a breakdown of support at 1.1197 (daily low) may yield a pullback to 1.1155 (support offered the trendline sloping higher from Apr 17 low and May 11 low) and 1.1109 (May 30 low).