EUR/USD Daily Price Forecast – EUR/USD Moves Downtrend Post FOMC Update

The EUR/USD could be in for a big move soon, having spent more 1.5-month in the narrowing price range or pennant pattern. As of writing, the pair is trading at 1.1649 with 0.09% decrease in value. Resurgent US dollar demand across the board is the main underlying theme in Asia this Thursday, as the greenback extended the post-FOMC bounce amid jittery markets amid escalating US-Sino trade tensions. EUR/USD is having a moderate bullish reaction as FOMC maintains target interest rate in 1.75-2.00%.  For the most part, traders ignored data and quickly moved on from the FOMC clearly signaling an imminent rate hike. Some of key notes from FOMC statement include – The unemployment rate has ‘stayed low’ versus ‘declined’, 12-month inflation ‘remains near’ 2% versus ‘moved close to’ 2%, Monetary policy stance remains accommodative, Job gains have been strong in recent months with the unemployment rate staying low, No changes in guidance or balance of risks, Household spending has ‘grown strongly’ versus spending ‘has picked up’ previously and Economic activity has been rising at a ‘strong’ rate versus ‘solid’ rate.

US Dollar Gains Post FOMC Update But A Breakout Seems Less Likely During Today’s Trading Session 

The report is viewed by many analysts as the best reading since March and a solid prelude for non-farm payrolls on Friday where nearly every industry posted strong gains and small business hiring picked up. As for rates, the US 10yr yields climbed 2-3bp to above 3.00% for the first time since 13 June and the  2 year yields put up an extra 1bp to 2.68%. The Fed funds futures rose a touch on the Fed and was pricing a September rate rise as at least 80% chance.  The pair’s movement today continues inside the wider price band in which the pair has remained trapped in last few sessions and it will likely adopt a strong bullish/bearish bias depending on the direction of the breakout as longer the duration of the consolidation, bigger the breakout (bull/bear) tends to be. However it is less likely for occurrence of breakout today as the Eurozone economic calendar is light. Meanwhile, no first tier data are scheduled for release in the US.

As a result, the EUR/USD pair will likely continue trading the ever-tightening ranges and could see a big breakout after tomorrow’s non-farm payrolls release. A big miss on the payrolls and wage growth figure could trigger a bullish pennant breakout. The currency pair has created back-to-back doji candles along the 20-month moving average, signaling indecision among the bears. So, it is safe to say the odds are stacked in favor of a bullish move. That said, an above-forecast reading would put the focus bank on the Fed-ECB divergence and could yield a downside break of the pennant setup. Expected support and resistance for the pair are at 1.1630 / 1.1610 and 1.1710 / 1.1745 respectively.