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EUR/USD: correction to 1.0775 likely as we await results of Federal Reserve meeting

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On Tuesday the euro closed up by 0.99%. The strengthening of the single currency began in the European session, and sped up during American trading hours. Experts agree that this rise is a result of comments made by one of US president Donald Trump's advisors.

Peter Navarro, director of the National Trade Council, accused Germany of currency manipulation. He claims that Berlin is artificially devaluing the euro to give them the upper hand in trades with the US and other European countries. In a Financial Times interview, he also noted that the euro has turned into an "implicit Deutsche Mark".

The American statistics released yesterday turned out worse than expected. The Chicago Purchasing Managers' Index fell to around 50.3 (forecasted: 55.0, previous figure: 54.6). The US Consumer Confidence Index fell to 111.8 (forecasted: 113, previous: 113.3).

Market expectations:

For Wednesday, the Federal Reserve meeting, and an ADP report on employment are the centre of attention. The current rate is expected to remain unchanged. The likelihood of rates being raised is about 4%.

After yesterday's rally, the euro may step back to around 1.0775 before the federal Reserve meeting. I'd rather not discuss politics, but in recent weeks, currency rates have been quite sensitive to statements made by White House representatives.

Donald Trump's victory was a blow to America's elite, and now they are trying to use the mass protests against him to force his hand. If it turns out he can't be controlled this way, they will likely try to threaten him with impeachment. In the first 100 days of Trump's presidency, uncertainty persists.

Day's news:

  • 10:00 UK: Nationwide housing prices (Jan);
  • 11:30 Switzerland: Purchasing Managers' Index (Jan);
  • 11:55 Germany: Markit Manufacturing PMI (Jan);
  • 12:00 Eurozone: Markit Manufacturing PMI (Jan);
  • 12:30 UK: Markit Manufacturing PMI (Jan);
  • 16:15 USA: ADP employment change (Jan);
  • 17:30 Canada: RBC Manufacturing PMI (Jan);
  • 17:45 USA: Markit Manufacturing PMI (Jan);
  • 18:00 USA: ISM Manufacturing PMI (Jan), construction spending (Dec), ISM prices paid (Jan);
  • 18:30 USA: EIA crude oil stocks change (week ending Jan 27);
  • 22:00 USA: Federal Reserve decision on interest rates.

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: n/a, high: n/a, close: n/a

Eward Navotny sent the euro down to 1.0620, and Peter Navarro sent it back up to 1.0820. Who will be next to stage a verbal intervention on the Forex market?

Because of the Federal Reserve meeting today, I'm not going to make any predictions. Given a 13-hour consolidation period, the rate may again approach 1.0827. On the daily timeframe, the euro is heading to a maximum of 1.0873; its highest since the 8th of December 2016. The market, for the most part, is not expecting a rate hike from the Federal Reserve. In this regard, retailers are unlikely to be able to stop consumers.

Judging by the fact that the price has begun to roll away from U3, there is a possibility of buyers retreating to the trend line (around 1.0775) on the back of rising US bond yields.



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