The EUR/USD is trading higher on Tuesday ahead of the release of the latest Fed monetary policy meeting minutes from September. Traders expect the minutes to show the policymakers primarily discussed inflation and its impact on the Fed’s decisions to raise rates in 2108.
Fed Chair Janet Yellen acknowledged in her press conference after the meeting that the central bank may have underestimated inflation, but it is still necessary to move forward with gradual tightening. The Fed also decided to begin trimming its balance sheet. However, this was not much of a surprise.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The trend turned up earlier in the session when buyers took out the previous swing top at 1.1832. Although this is a potentially bullish signal, we may not see much of an extension to the upside because of retracement zone resistance at 1.1850 to 1.1894.
On the downside, the major support levels are the 50% level at 1.1695 and the Fibonacci level at 1.1603.
Based on the current price at 1.1827 and the earlier price action, the direction of the EUR/USD the rest of the session will be determined by trader reaction to the 50% level at 1.1850.
Overtaking and sustaining a rally over 1.1850 will indicate the presence of buyers. This could drive the market into a downtrending angle at 1.1883 and a Fibonacci level at 1.1894.
We could see a technical bounce on the first test of the retracement zone, but if the upper or Fib level is taken out then look for the rally to extend into 1.1958.
The inability to overcome the 50% level at 1.1850 will signal the presence of sellers. This could trigger a pullback into the short-term uptrending angle at 1.1788. This angle has been guiding the market higher since October 6.
If 1.1788 fails as support then look for a possible acceleration to the downside with the next target angle coming in at 1.1728.
Basically, look for the bullish tone to continue on a sustained move over 1.1850 and for a bearish tone to develop on a sustained move under 1.1788.