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Opinion on EUR/USD ahead of the FOMC protocols
Hello, dear colleagues!
The main event of today, and perhaps the whole week, will be the publication of the minutes of the last meeting of the US Open Market Committee (FOMC). As a rule, the current state of the American economy, as well as all important aspects of monetary policy, becomes clear from the FOMC protocols. Also, it becomes clear how exactly the votes of the members of the Open Markets Committee were distributed regarding the further monetary steps of the US Central Bank.
Given the recent speeches of FOMC members, as well as the speech of the head of the Fed Jerome Powell before the US Congress, the rhetoric of the protocol may be quite "hawkish", that is, more rigid than market participants expect.
This may result in maintaining the current monetary policy and in refusing to further reduce rates. At least in the short term. Most likely, the protocol will reflect that changing rates will require a different assessment of the prospects for the American economy, and there are no sufficient grounds for this at this stage.
If such signals for investors are reflected in the minutes of the October meeting, the US dollar may receive support and strength across the entire spectrum of the market. However, it is not known how strong it will be and whether it will be at all. This is just an assumption.
Interestingly, often the technical picture for a particular instrument reflects the direction that will be received after the release of such important news, so let's turn to the price charts and try to understand what direction awaits today the main currency pair EUR/USD.
Daily
As a result of yesterday's trading, the pair strengthened, but the growth was quite restrained. Investors took a break in anticipation of the publication of the Fed protocols.
The fact that the euro failed to understand the quote to the previous highs of 1.1089 yesterday, as well as to close Tuesday's trading above the Kijun line of the Ichimoku indicator and the 89 exponential moving average, may play into the hands of their opponents.
On the other hand, yesterday's candle was the second in a row to close above the Ichimoku cloud. Let me remind you, to consider this output (as well as any breakdown) true, it would be good to see three consecutive candles closed above. Thus, today will be extremely important for EUR/USD.
The bulls on the pair have long been bogged down near the strong technical level of 1.1080, and to demonstrate the seriousness of their intentions, they need to return trades not only above 1.1080 but also another fairly important and significant mark of 1.1100. Only in this case, it will be possible to hike towards 1.1200 and test for a breakdown of this technical level. The tasks are very serious, and they certainly cannot be called easy.
Given the importance of today's event, the rate hike players will have a good opportunity to implement their plans, but everything will depend on the market reaction to the FOMC protocols. I believe that the bears will also come out of hibernation after 20:00 (London time).
H4
Looking at the technical picture at this time interval, we see that at the moment of writing, the pair is trading above the moving averages: 200 EMA, 89 EMA, and 50 MA. At the same time, there is a tendency to turn downwards, which is signaled by the last few candles.
To sum up, in my opinion, after the publication of the protocols, increased volatility is inevitable, as well as the probability of initial sharp and strong movements in both directions. Well, we will see the final choice of direction a little later, about half an hour after the publication of the Fed protocols.
In my opinion, the current picture is more indicative of a high probability of a decline to 1.1033, 1.1012, and 1.0988. In the case of a negative reaction of market participants to the FOMC protocol, the US dollar will fall under the wave of sales, and the main currency pair will rush to the following targets: 1.1089, 1.107, 1.138 and probably to the area of the key resistance, which passes near 1.1180.
In conclusion, let me remind you once again that the Fed minutes will be published at 20:00 (London time), after which trading will be associated with increased risks. Be careful and attentive! For those who do not want to be nervous and take risks, it is better to stay out of the market. I will refrain from trading recommendations today.
Good luck!
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