Top Story

EUR/USD in pullback mode ahead of FOMC

EUR/USD pulled back towards the 1.1600 level early on Wednesday, ahead of the potentially pivotal Fed statement to be issued later in the day at the conclusion of this week’s two-day FOMC meeting. The currency pair pulled back as the embattled dollar attempted yet another relief rally in its struggle to rebound since the beginning of this week. At this point, recent market expectations that the Fed will continue to sound dovish regarding interest rates remain prevalent, which helps account for the sustained pressure on the dollar.

Since much of this expectation has already been heavily priced-in to the weakened dollar, however, any surprise from the Fed should conceivably be more likely to be positive for the beleaguered greenback. While the Fed today is expected to affirm its commitment to reduce its balance sheet, probably to begin in September, what Fed officials will say about interest rates going forward is still largely unknown. Recent comments from Fed policymakers have suggested that much higher rates should probably not be expected. But if the FOMC statement unexpectedly backs off from this dovish stance, the dollar could get a boost.

In the event of such a hawkish surprise, a boost for the dollar could bring EUR/USD further off its lofty highs. Just on Tuesday, the currency pair hit a key upside resistance target at 1.1700 before pulling back. The pair has been due for a more significant pullback, and any hawkish Fed surprise could serve as a catalyst for such a pullback. From a technical perspective, any Fed-driven breakdown below 1.1600 support has a key downside target for a pullback around the 1.1450 support level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account