The euro edged higher as the dollar drifted lower on Wednesday ahead of the US Federal Reserve’s monetary policy meeting, when the central bank is expected to hike interest rates by another 75 basis points to tame rising inflation. The Fed is expected to make its announcement at 18:00 GMT.
As of 13:36 GMT, EUR/USD is trading at 1.0152, up 0.0034 or +0.34%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $93.75, up $0.27 or +0.29%.
According to financial futures markets, investors are betting that the Fed will hike rates by 75 basis points with a slim chance of a larger 100 basis point hike. Traders expect the Fed to hike rates up to 3.4% by year-end to bring inflation back on target.
With the 75 basis point rate hike almost a given, traders will pay more attention to Federal Reserve Chair Jerome Powell at his post-meeting press conference. They’ll be looking for clues as to whether the Fed will continue to fight inflation with aggressive rate hikes or pull back a bit on worries about a slowing economy.
Barring the Fed raising rates by 100 basis points, the market-moving event is likely to be the tone of Powell’s comments. A hawkish tone could push EUR/USD sharply lower. A dovish tone is likely to fuel a short-covering rally. Due to the energy problems in Europe, it can be assumed that this will not last.
Daily EUR/USD
Daily swing chart technical analysis
The main trend is down according to the daily swing chart, however, the momentum is sloping up.
A trade above 1.0278 will change the main trend to the upside. A move through 0.9952 will signal a resumption of the downtrend.
The short-term range is between 0.9952 and 1.0278. Its retracement zone at 1.0113 to 1.0075 is support.
On the upside, the next resistance is the pivot at 1.0193. Other areas of resistance include the pivot at 1.0284 and the mid retracement zone at 1.0363 to 1.0460.
Technical forecast of the daily swing chart
Trader reaction to the 1.0113 – 1.0075 retracement zone is likely to determine EUR/USD direction until Wednesday’s close.
bullish scenario
Continued movement above 1.0113 will indicate buyers presence. Initial upside target stands at 1.0193. A break above this level will indicate buying strengthening with the next target being the 1.0278-1.0284 resistance cluster.
A break out of 1.0284 could trigger an acceleration into 1.0363 to 1.0460.
Bearish Scenario
A sustained move below 1.0075 will put EUR/USD in a weak position. If this generates enough downside momentum, look for a sharp break into the recent major bottom at 0.9952.
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