The EUR/USD currency pair is trying to break out against the US dollar during the trading session on Wednesday as we wait for the FOMC announcement and of course the press conference that comes afterwards. The market continues to believe that the Federal Reserve is going to loosen up, but at the end of the day I think it’s more or less a situation where the Federal Reserve is trying everything, it can beat down risk appetite, and that generally means that the US dollar will strengthen given enough time.
Focus on the FOMC Announcement
That being said, a lot of this will come down to how people react to the statement, and of course whether or not the interest rate hike is 25 basis points or 50 basis points, because it could set the table for where we go next. Breaking above the 1.10 level would be a continuation of the bullying of the Federal Reserve by the market, which is trying to force its way going forward. Over the last 15 years, the Federal Reserve has been guilty of allowing that to happen, so this is a monster of their own making.
- The market could break down, but we need to break through the bottom of the hammer from the Tuesday session in order to fall towards the 50-Day EMA.
- That is sitting just above the 1.06 level, which of course is a large, round, psychologically significant figure, and an area where we’ve seen quite a bit of interest in the past as well.
- Because of this, I think it’s more or less going to be a situation where we are going to have to deal with whether or not that holds on any type of breakdown.
- If Jerome Powell is hawkish enough, he may actually make that happen.
On the other hand, if we turn around and take out the 1.10 level above, that opens up the possibility of a move to the 1.12 level given enough time. That would obviously be very bullish for not only the Euro, but it’s possible that the US dollar itself will continue to get hammered against multiple currencies, not just the Euro itself. All things being equal, this is a market that is on the precipice of a bigger decision, so you will want to be involved once we get an impulsive break out or break down.
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