EUR/USD moves back above 1.1300 again
The range between 1.1300 and 1.1400 appears to be the ‘comfort zone’ for EUR/USD over the past three weeks and so far the tug of war between buyers and sellers is continuing in the new week as well.
Price tested the swing region resistance around 1.1270-76 (76.4 retracement level also there) on Friday before bouncing back up as we wrapped up the week. And failure to break below that once again highlights how tough it is for a significant break to materialise over the past few weeks.
For buyers, any extension of the trading range today will see resistance from the 100 and 200-hour moving averages @ 1.1339 and 1.1356 respectively. Meanwhile, a downside extension will be limited by the same support levels above.
This indicates that price is still very much in limbo territory as we approach the FOMC decision on Wednesday. There doesn’t appear to be much catalyst for any major movement in the euro following the ECB last week so all the focus will turn towards the dollar’s performance post-FOMC as we close out the year.
That will be the major focus for the pair now. The Fed is still very much expected to hike rates and markets have priced that in for the most part by now. All the attention will shift towards any change in language by the Fed with regards to future rate hikes, with the immediate focus being on the ones to come next year.
I don’t expect much dot plot changes so it’ll depend heavily on how dovish the Fed views future rate hikes especially with neutral rate talks ramping up and a hint of a possible shift to be even more data-dependent than they already are now. Not to forget, there’s also worries concerning the yield curve inversion as well.
‘Buy the rumour, sell the fact’ seems to be the game most market participants will be playing ahead of the Fed but be mindful that Powell & co. may still have some surprises up their sleeves – particularly if they don’t want to seem like they are pausing the tightening cycle just because Trump is asking them to.