- The EUR/USD experienced a modest rally during Tuesday's trading session, reaching the 1.08 level against the US dollar.
- However, significant resistance is anticipated from 1.08 to 1.10 levels.
- As the Federal Reserve meeting is scheduled for Wednesday, the market is gearing up for a potential trade, largely hinging on Federal Reserve Chairman Jerome Powell's stance on monetary policy and interest rates.
- Currently, there is a broad consensus that no one can accurately predict the outcome, which contributes to the market's uncertainty.
Although Wall Street and several large firms are advocating for the Federal Reserve to halt rate hikes, the reality might not align with their desires. Concerns about inflation are mounting, and should the Fed decide to loosen monetary policy again, inflation could be exacerbated. The market has been at odds with the Fed for some time, and with recent bank failures, many believe that the Fed must act to loosen policy sooner rather than later.
Pay Close Attention to the Market’s Behavior
The US dollar has seen some selling pressure lately, but a surprise hawkish stance from Jerome Powell and the Federal Reserve could result in a sharp decline in the EUR/USD pair. The next few trading sessions are expected to be crucial, so traders should closely observe market behavior. Signs of exhaustion between 1.08 and 1.09 should be approached with caution, as this range has previously witnessed an impulsive downward move.
It is worth noting that the market recently bounced from the 200-day exponential moving average (EMA), which is generally considered a bullish signal. However, if the pair breaks down, the 200-day EMA could become a target. Conversely, if the Euro continues its rally, traders should remain cautious around the 1.10 level. A break above 1.10 could trigger a significant upward move in the Euro, which would likely be a result of the Federal Reserve altering its overall stance on monetary policy.
TLDR; the Euro has experienced a slight rally ahead of the Federal Reserve meeting on Wednesday, but resistance levels between 1.08 and 1.10 pose challenges. The outcome of the meeting and Jerome Powell's stance on interest rates will play a pivotal role in determining the future direction of the EUR/USD pair. Traders should pay close attention to the market's behavior in the coming sessions, as any significant moves could signal new opportunities or risks.
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