EUR/USD Daily Forecast – Euro Snaps 5-Day Losing StreakEUR/USD caught a bid from support on Tuesday to end a 5-day consecutive decline. Volatility is expected in the session ahead as the Fed will release minutes from their latest meeting.
Fed Meeting Minutes Scheduled For Release Later Today
Market participants are likely to see an increase in volatility as the Federal Reserve will release minutes from their July meeting later on today. The minutes will be carefully analyzed as the Fed cut rates last month which somewhat ended their past tightening cycle.
I use the word somewhat because it was not exactly clear in the press conference that followed the meeting where the central bank stood. Fed Chair Powell positioned in such a way that left the bank open to either cutting, raising, or remaining neutral in the future. It’s an ideal spot to be in for policymakers but does not provide much in terms of forward guidance for the markets.
The markets scaled back expectations following the last meeting because they had expected the Federal Reserve to be more dovish. They had thought the Fed would signal the start of a new easing session, or perhaps ease more aggressively.
There might have been some Fed members that felt a more aggressive approach was necessary and today’s meeting minutes will reflect exactly how individual members felt about the policy decision in July.
I think it is important not to read too much into the minutes. Powell held a neutral tone because factors impacting monetary policy can change quickly in today’s environment. For one, the markets have fully priced in a cut in September based on new information in early August. It is very possible that the Fed also sees new reasons to ease policy further that they did not in late July.
The daily chart below shows support at 1.1074 holding. The pair also posted a bullish engulfing daily candle which suggests the potential for a further recovery.
The momentum in EUR/USD is to the downside despite yesterday’s developments. I’d like to see the pair cross above 1.1118 before considering that it is trying to make a recovery here. While it stays below it, I’d continue to look for sell signals on the lower time frames.
- EUR/USD appears to be attempting a recovery. A cross above 1.1118 will provide some additional confirmation.
- Fed meeting minutes will be released in the US session later today.