ING: The EUR - FJElite

We expected a hawkish Fed could take us to 1.150, but the meeting exceeded our expectations and prompted a big break lower in EUR/USD. The two-year swap rate differential widened by 15bp to the widest since July, when EUR/USD was exploring sub-1.14 levels.

Surely, the ECB's own hawkish message is offering better support to the euro, but oil prices are much higher than two months ago. Our model now shows a short-term fair value at 1.150,1% lower than a week ago.

Further moves in front-end rates, oil or global equities can quickly push that fair value lower. So downside risks persist, and there is little (especially eurozone-born) - outside of a correction in energy prices - that is likely to turn the tide for EURUSD at this stage. There is, incidentally, no strong technical support in sight before the 1.132-1.135 area, which marked the bottom of the summer.