Published date: 18/09/2019

At the time of writing, EUR/USD is trading at 1.1049. In the daily timeframe, indecision remains vivid, with the price ranging between the 1.099 and 1.1104. Overall, the pair is still under a 12-week long descending trendline and significantly below the 200EMA. 

On the weekly, however, price action looks clearer. Wicks are evidently rejecting the 1.095 demand zone, which has not been tested since May 2017. If this weeks candle closes bullish, the upside momentum cannot be discarded. 

Now, lets me break the fundamentals for you. There is a considerable probability of the FOMC cutting rates once again today. A 0.25% cut is almost secure but anything less than that (or even hawkish signs) could significantly move the market. Even though the release of the report is important, the main focus will be in Powell’s press conference. If Jerome changes if bias to a positive economic outlook, EUR/USD latest recovery will vanish in a blink of an eye. Investors are considering this meeting an important piece of the puzzle, as it could draw the direction of the FOMC meetings happening in October and December. 

Today’s policy statement will essential to predict near-term market trends, not only in EURUSD but in major pairs such as USDCHF and GBPUSD which are currently testing relevant liquidity zones. The overall balance sheet is almost 0-0, as both economies, the EEUU and the Eurozone have their Achilles' heel. 

On the Eurozone side, the general economic weakness of the region is not a secret but rather a reality. The near term industrial activity remains low as well as its inflation. The EUR has earned the title of the worst performing currency inside the G-10 gang, with Germany’s status still being the determinant factor.  Germany’s manufacturing sector is showing no signs of recovery and the unsolved issues in the Brexit plot is not making things better. Nonetheless, the latest ECB cut has given the region an edge. Why? Remember what we have been stating, when a cut happens, the EUR is more attractive in the mid-term as it is cheaper to borrow with that currency. With the deposit rate below zero, investors may be looking forward to borrowing the Euro for selling it later in the market for higher-yielding currencies. 

Regarding the Dollar, FX traders are not positive on October trade talks. Let's be honest here, the chances are that the differences between the US and China will remain beyond this date. Another factor that has been staying under the table is the fact that the US fiscal deficit is getting worse, which may trigger an alarm sooner or later. 

All in all, the tide is turbulent. Our recommendation for our audience is to carefully monitor today’s reaction of the market to the FOMC press conference, and from there, we are going to have a clear idea of the path EURUSD would be taking in the next couple of weeks. 


Leave a Comment