EUR/USD Daily Price Forecast – EUR/USD Moves Range Bound Ahead of FOMC Update

The relentless widening of the US-German (DE) yield spread indicates that markets have priced-in Fed’s gradual path of tightening.
Colin First
EURUSD Wednesday
EURUSD Wednesday

EUR/USD held within a range below the psychological 1.1800 handle in European trading yesterday as investors await guidance from the Federal Reserve, with interest rate decision updates scheduled to release today. With several risk events this week, a breakout appears to be inevitable and technical pattern favors a break to the upside. The US Fed is expected to hike rate by 25 basis points and the move has been priced in, so fluctuations in the greenback will be largely dependent on forward guidance as markets look forward to two more rate hikes this year. Policy makers will be sharing their latest thoughts on the economy and updating the dot plot into 2021. As of writing this article, the EURUSD pair is trading near flat at 1.1764 down by 0.03% on the day.

Investors Look To Forward Guidance Data In FOMC Statement Before Placing New Bets

This is evident from the relentless rise in the US-German yield differential. For instance, the two-year yield spread, which is more sensitive to interest rate expectations, has gone up by 84 points this year. Further, it has increased by 16 basis points in the last four weeks. Clearly, the gradual rate hike path is baked in, hence the rate hike is unlikely to push the EUR/USD lower. The USD may rise across the board only if the Fed signals low tolerance for above-target inflation and willingness to push rates above the neutral level of 2.87 percent.  In addition to the central bank meeting, the markets will also be sensitive to ongoing trade discussions. Market participants have been familiar with the ongoing impacts of headline news related to talks between China and the United States.

Meanwhile NAFTA negotiations have once again come into the spotlight as Trump’s deadline to Canada for closing the deal is less than a week away. When looking from technical perspective, The EUR/USD has charted a big diamond pattern on the hourly chart. A move above 1.1780 (diamond hurdle) would signal a continuation of the rally from the Sept. 10 low of 1.1526 and allow a re-test of the recent high of 1.1815. Further gains are ruled out for now as the Fed is expected to sound hawkish. The downside break of the diamond pattern would signal a bullish-to-bearish trend change. Expected support and resistance for the day are at 1.1720, 1.1700, 1.1660 and 1.1815, 1.1852, 1.1945 respectively.

 

 

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US