21.03.201908:39 Forex Analysis & Reviews: The Fed ended the cycle of raising interest rates

The decision of the March Fed meeting was not only to leave interest rates unchanged but also a signal that there will not be any increases this year.

It happened on Wednesday when many in the markets were expecting and perhaps deeply wanting the decision of the American regulator to stop the cycle of raising interest rates. In the communique of the bank, it was reported about the need to show "patience" in an effort to tighten monetary policy this year since inflation remains restrained. Economic growth signals its weakening while the labor market will remain strong. The regulator made it clear that this year one should not expect the promised increase in interest rates but one may be implemented in 2020. In fact, the American Central Bank and its leader commented after the meeting, stating that the current cycle of interest rate increases, which started under the previous leader Janet Yellen in 2015 was over.

The American stock market reacted ambiguously to this news. The Fed has signaled that it expects a decline in economic growth, which means that this process may continue and smoothly turn into a recession and in turn, becomes a negative signal for investors. The stock market will now monitor very closely the incoming economic data and if he sees that the inhibition will continue, the shares of the companies will continue to sell on the market. In this case, the question arises: will the Fed renew some incentive measures to support the local stock market? For the reason that there will be a new presidential election in 2020 wherein Donald Trump wants to run for a second term?

It is likely that the Fed will have to find a way to support the stock market with some new incentives, following the example of how the Chinese began to do this. In this case, the US dollar, could break out of the trading range and be under strong pressure in the medium and long term.

As for its nearest possible behavior, we believe that the negative dynamics can continue if the outgoing data of US economic statistics show a weak dynamic.

Forecast of the day:

The EUR/USD pair is trading above 1.1395 after strong growth on the eve. The pair may adjust down to this point. If it resists, the price will push off from it and continue to rise to 1.1480.

The USD/JPY pair can be adjusted to the level of 110.85 after a strong fall. If it resists and such a probability remains, the pair can turn around and test the level of 110.40 again and go even lower to 110.00.