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Amplitude of the last 5 days (high-low): 70p - 160p - 54p - 94p - 85p.
Average volatility over the past 5 days: 93p (high).
Since summing up and announcing the results of the Fed monetary committee meeting is as if isolated from other macroeconomic events and will finally take place, so far we are drawing the attention of traders to the only macroeconomic report of the day that was related to the EUR/USD pair. Inflation for the EU in August was published this morning . It turned out that the consumer price index rose 1.0% compared with August of the previous year. Annual inflation in the EU at the moment is only 1%. We remind you that the target inflation rate, which the Fed and the ECB are striving for, is 2.0% a year. Things are even worse on a monthly basis. An increase of 0.2% was expected, but in reality prices rose by 0.1% compared to July. The annual indicator fully coincided with the forecast value. What does this mean? There is still nothing good for the euro. The single currency has excellent chances to strengthen today, and in the coming weeks, and even months, if the Fed really took a targeted course to reduce the key rate. However, if macroeconomic statistics from Europe continue to disappoint market participants, no easing of US monetary policy will help the euro.
Today it will become known what course the Fed has taken. At the last meeting in July, Jerome Powell said that the rate cut was corrective after several increases, so to speak stabilization. Today, the rate can be reduced by 0.25% and 0.50%, that is, the second time in a row. In any case, this will mean that the regulator headed for a systematic reduction in the rate, whatever Jerome Powell would say. By and large, any reduction in the rate will mean that the Fed nevertheless heeded Trump's regular angry statements and his arguments. However, there is an option in which the rate will not be lowered, and it will be a real bomb for the foreign exchange market. According to many experts, the reduction in the rate by 25 basis points has already been worked out by traders and laid in the current rate. But there are actually not so many macroeconomic reasons for a new easing of monetary policy. Only a slowdown in inflation in August up to 1.7% can be singled out. Is this enough argument for Powell and company to lower the rate? Or does macroeconomic statistics now play no role at all, and the Fed will simply follow Trump's plan, which will allow the country to improve its position in the trade war with China? If the Fed refuses to mitigate monetary policy in September, the US dollar could rise in price across the entire spectrum of the market. Well, Donald Trump will bring a new flurry of criticism to Fed Chairman Jerome Powell.
Taking into account all these factors, we believe that in reality the probability of a rate change to a lower value is not more than 50% at the moment, since no one knows what motives the monetary committee will be guided by when making a decision.
From a technical point of view, we have an upward trend, a double bottom pattern and a rebound in prices from important levels of 61.8% Fibonacci and 38.2% Fibonacci. Thus, the technique speaks almost unambiguously in favor of continued growth. However, at the last meeting of the ECB, when the regulator lowered the deposit rate by 0.1%, the euro first fell by 100 points, and then grew by 150. And all this for several hours. Thus, something like this is quite possible today.
Trading recommendations:
The EUR/USD pair resumed the upward movement. Thus, it is now recommended to reconsider the purchases with targets of 1.1110 and 1.1146. However, in any case, we recommend that you be careful with opening and maintaining any positions during the announcement of the results of the Fed meeting and Jerome Powell's speech at a press conference.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
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