Fed to remain hawkish,declining oil prices to slow ratehike pace

FX:EURUSD   Euro / U.S. Dollar
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The markets seem to be eagerly waiting for the Fed’s rate hike on Wednesday. But there is still debate going on whether Central bank will hold the rate hike for a while which has already exceeded nine years.

In 2014 Fed has given key focus on employment, consistent increase in jobs and reduction in jobless rate have forced Fed to taper QE3 and paved way for higher interest rates. But decline in inflation is forcing the Fed to delay rate hike until now.

The key reason for decline in inflationary pressure was mainly due to sell-off in global crude oil             prices which broke to new lows last week.

The FOMC is expected to hike rate at least by 25bps today with a monetary policy statement accompanied by a hawkish tone. The Fed’s plan for the monetary policy ahead after a rate hike is shown by Dot plot. If the Dot projection is flatter than expected then there will less number of hikes next year and the rates will rise at slower pace.

If Fed is more hawkish than expected – EUR/USD             is expected to break major resistance 1.10900 and will reach till 1.1178/1.1200 level.

If Fed is more dovish than expected – EUR/USD             will break major support 1.0900 and will reach till 1.08300/1.0760 level.
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