Top Story

Pressured EUR/USD braces for FOMC

Though markets are not at all expecting the US Federal Reserve to make any substantive changes to monetary policy this afternoon when the FOMC meeting concludes, the general expectation is that the Fed will lean towards a more hawkish stance, potentially reinforcing the high likelihood of a December interest rate hike as well as further rate hikes and balance sheet reduction through next year. These expectations, coupled with the anticipation of a new Fed Chair to be appointed by President Trump possibly on Thursday, have helped to prop up the US dollar just as the euro has continued to be pressured due in part to a dovish European Central Bank last week.

Ahead of the Fed decision and statement on Wednesday afternoon, the US dollar has remained well-supported while the euro has generally remained weighed down. This has now placed the EUR/USD currency pair at a precarious juncture just above the 1.1600 handle. Previously, EUR/USD had already broken down below a large head-and-shoulders bearish pattern last week in the aftermath of the ECB decision. The pair has since settled just above the noted 1.1600 support area, now forming what could turn out to be a bearish inverted flag pattern in the process.

If the Fed indeed sounds a more hawkish tone on Wednesday, the statement could prompt a continued dollar surge that triggers a further breakdown for EUR/USD. Other key upcoming events, including Trump’s impending Fed Chair appointment as well as the highly anticipated US tax reform bill, could also trigger a substantial dollar move. With such a move, a significant dollar-driven EUR/USD breakdown below 1.1600 support could open the way towards the next major support level to the downside around the 1.1450 price area.

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.