All eyes are on the markets and investors are waiting for the decisions of the US Central Bank, which will have a strong reaction on all currencies against the US dollar. Prior to the event, the price of the EUR/USD currency pair is settling downward around the support level 0.9870 at the time of writing the analysis.
This is an important trading week for global markets, with the US Federal Reserve policy update on Wednesday followed by the all-important US jobs report on Friday. Thus, the EUR/USD exchange rate will be driven by the dollar side of the equation, especially now that the October ECB monetary policy meeting is over. "We're doing something we don't normally do and going with a directional bet in US dollars for our trading this week," says Elsa Lignos, FX Analyst at RBC Capital Markets.
Particularly intriguing is the prospect of a "pivot" in the Fed, as they point out that Wednesday's expected 75 basis point rise is the last of its kind, with the pace of gains slowing from December onwards. So some analysts say this may confirm the notion that the peak in the US dollar has now reached, something referred to in financial circles as the "pivot".
Analysts at Bank of America are cautious that such a pivot will in fact lead to a fundamental weakness of the US dollar. And for Lignos and her team, the show is short-lived, after all it's the "trading of the week." The analyst is looking for this week's message: “To be more precise - Powell should be asked about December and backtracked. To retain the selectivity, it almost has to deliver a less stringent message (50 basis points on the table).” "We believe it is worth a shot for another break above parity," the analyst added. RBC Capital aims to move EUR/USD to 1.0140 from 0.9917.
Forecast of the euro against the US dollar today:
- The price of the EUR/USD currency pair is moving in the path of a descending channel that was formed recently since it abandoned the parity price last week.
- It is breaking the 0.9820 support on the daily chart below will trigger the bears for more bearish move as the technical indicators still have more space before reaching the levels.
- On the other hand, and over the same period of time, the stability of the euro-dollar currency pair, above the parity price, will be important to enable the bulls to trend again.
The pair may remain in a narrow range until the reaction to the US central bank's decisions later today. The importance returns to whether the US central bank will continue on its path, change the path, or reduce the rate of raising. The meeting is important and the reaction will be strong.
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