EUR / USD rates bounce off 50-day SMA prior to FOMC rate determination

EUR / USD rate talking points

EUR / USD Try to follow the next decline European Central Bank (ECB) Conference The exchange rate could recover significantly in the next few days as the Federal Reserve is expected to maintain its current monetary policy direction, bouncing off the 50-day SMA (1.2104).

EUR / USD rates bounce off 50-day SMA prior to FOMC rate determination

Recent weaknesses Euro/U.S. dollar Seems to be declining first Federal Open Market Committee (FOMC) Interest rate decision as it is Start a series of highs and lows From Monthly low (1.2093), And much of the same from the central bank, the Fed saidIncrease Treasury securities holdings by more than $ 80 billion per month and government agency mortgage-backed securities by more than $ 40 billion per month.. “

The FOMC doesn’t seem to be in a hurry to switch gears as the central bank plans to take advantage of emergency measures.Until substantial further progress is made towards the Commission’s maximum employment and price stability goals“Chairman Jerome Powell The central bank continues to sayPromised to use its full range of tools to support the US economy during this difficult time.. “

However, another upward revision of the Fed’s Economic Forecast Summary (SEP) could drag EUR / USD as it fuels speculation about the upcoming changes in monetary policy, and the FOMC will “a” over the next few months. The number of participants is appropriate to start discussing plans to pace asset purchases at some point in future meetings if the economy continues to make rapid progress towards the Commission’s goals. Suggested that it might be.

Fed interest rate dot plot image

Source: FOMC

As a result, market participants may pay more and more attention to the Fed’s interest rate dot plot as discussions within the FOMC to curtail quantitative easing (QE) programs increase, but traders may look after April. Pure short EUR / USD.

EUR / USD rate IG client sentiment image

The· IG Client Emotion Report show 39.98% of traders the current Net long EUR / USD, In the ratio of short traders to long traders Are standing 1.50 to 1.

The number of Netlong traders has increased by 4.99% from yesterday and 0.60% from last week, and the number of NetShort traders has decreased by 6.90% from yesterday and 8.69% from last week. A slight rise in net long positions comes as EUR / USD Bounce from 50-day SMA (1.2104)Meanwhile, lower net short interest rates helped mitigate congestion behavior, as only 35.47% of traders were net long pairs at the end of last week.

That said It remains to be seen whether the decline from the January high (1.2350) turns out to be a broader trend correction rather than a change in EUR / USD behavior as congestion behavior from 2020 resurfaces. I do not know. However, the Relative Strength Index (RSI) has been tracking the downtrend carried over since late April, warning that the exchange rate will fall further.

EUR / USD rate daily chart

EUR / USD rate daily chart image

Source: Trading view

  • Keep in mind that EUR / USD established a descending channel after a failed test attempt. April 2018 high (1.2414), But The drop from the January high (1.2350) A broader trend correction rather than a change in market movements as the exchange rate trades back above the 50-day SMA (1.2104) to break out of the bearish trend.
  • The· Relative strength index (RSI) It showed similar dynamics as the oscillator flipped in front of the oversold territory and out of the downtrend, but a series of unsuccessful attempts to push above 70 showed that the indicator was in the overbought territory. The trend from late April suggests that the bullish momentum will continue to weaken as it reverses forward and tracks downwards.
  • As a result, the EUR / USD snaps the June opening price range and breaks / closes. 1.2080 (78.6% retracement) area open 1.2010 (100% expansion) range.
  • However, the 50-day SMA (1.2104) rebound pushes the EUR / USD back from the Fibonacci overlap of 1.2140 (50% retracement) to 1.2170 (78.6% expansion) as the moving average reflects a positive slope. There is a possibility.The field of interest is coming From 1.2220 (38.2% expansion) to 1.2260 (161.8% expansion)..

— By David Song, Currency Strategist

Follow us on Twitter @DavidJSong

EUR / USD rates bounce off 50-day SMA prior to FOMC rate determination

Source link EUR / USD rates bounce off 50-day SMA prior to FOMC rate determination

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