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EUR/USD: markets await the Fed's press release

Previous:

Trading on the Euro/dollar pair closed up on Tuesday at 1.0932. A bare economic calendar in the US allowed the Euro to recover some of its losses and renew the session maximum owing to a drop in US bond yields to 2.18%.

Market expectations:

Our pair has been trading in a sideways trend for the last 7 days. On the 3rd of May, the price range is 62 pips, running from 1.0880 to 1.0942 levels. I'm inclined to say that this instrument will continue its sideways trend at least until the Fed's monetary policy meeting is concluded. It's expected that the US central bank will maintain interest rates within the range of 0.75% to 1.00%. CME's FedWatch tool puts the likelihood of a rate hike at 4.8%. There is no press conference planned for Janet Yellen, the head of the Fed.

In the build-up to the second round of the French presidential election, the single currency will be particularly sensitive to new surveys on the candidates. The latest opinion poll from Elabe shows that Le Pen has closed the gap on Macron from 28 to 18 (Macron/Le Pen: 59/41).

The resistance runs through 1.0942 level. I'm allowing for the possibility that buyers may test this level before trading opens in Europe in the face of the rising EUR/GBP cross. I'm expecting to see a rate of around 1.0918 around the time of the Fed's announcement.

Day's news (GMT 3):

  • 10:55 Germany: unemployment change (Apr);
  • 11:30 UK: PMI construction (Apr);
  • 12:00 Eurozone: preliminary GDP data (Q1), PPI (Mar);
  • 15:15 USA: ADP employment change (Apr);
  • 16:45 USA: Markit services PMI (Apr);
  • 17:00 USA: ISM non-manufacturing PMI (Apr);
  • 17:30 USA: EIA crude oil stocks change (Apr 28);
  • 21:00 USA: Fed's monetary policy statement, Fed interest rate decision.

EURUSD rate on the hourly. Source: TradingView

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

The EUR/USD is trading in a sideways trend, but the end of this phase is near. The price will exit the range by the end of the week, or at least expand its borders. From a low of 1.084, the rate restored by 45 degrees. 1.0942/45 level is covering sellers, while buyers are covered by the balance line lb at 1.0911 and the 45th degree at 1.0885. The 22nd degree is at 1.0911.

Given that traders will be focusing all their attention today on the Fed's meeting, markets will ignore most other news. Accordingly, I'm expecting the Euro to fall to around 1.0905/11 as cycles indicate. If the dollar strengthens across the market, then the Euro will fall to 1.0890.

Positives for the Euro ( ):

Fundamental:

( ) US president Donald Trump favours a weaker dollar;

( ) French elections: Emmanuel Macron won the first round of voting by a small margin;

( ) S&P has reaffirmed Germany's credit rating at AAA/A-1 with a stable outlook;

Technical (short-term):

( ) Small speculators have increased long positions by 4,253 to 66,753 contracts and short positions by 493 to 61,457 contracts. net-long positions have grown from 3,759 to 5,296 contracts;

( ) According to myfxbook, the Short/Long ratio as of 7:23 EET is 77%/22%, lots: 12511/3679 (previous day: 10820/3968), positions: 41108/12882 (previous day: 34302/14152);

( ) US 10Y bond yields: 2.289% (down 1.25% from 02/05/17);

( ) EURGBP (D): CCI (20) - up, Stochastic (5,3,3) - reversing upwards;

( ) EURUSD (M): Stochastic (5,3,3), AO, AC, CCI (20) - up;

( ) EURUSD (W): AO, AC, Stochastic (5,3,3), CCI (20) - up;

( ) EURUSD (D): Stochastic (5,3,3) - up;

Negatives for the Euro (-):

Fundamental:

(-) ECB head: revision of ECB's monetary policy not required at present;

(-) On Tuesday, the 2nd of May, according to CME Group's FedWatch, the probability of a rate hike in May is 4.8%. the probability in June has fallen from 70.7% to 66.3% and in July from 74.4% to 70%;

(-) Tension surrounding the situation with North Korea. Increased demand for safe haven assets;

(-) The US Congress has approved a temporary budget, avoiding a government shutdown for the time being. A week's delay will give time for knocking out a draft budget for the rest of the fiscal year (end of September). It became clear on the 1st of May that Republicans and Democrats had settled on a compromise to keep the budget going until the 30th of September;

Technical (short-term):

(-) According to data from  25/04/17, Large speculators on the Chicago Exchange have reduced their long and short positions. There are currently more short positions than longs. Long positions have fallen by 32,054 to 153,394 contracts, while short positions have fallen by 25,030 to 181,340 contracts. Net-short positions have increased from 7,023 to 27,946 contracts;

(-) German 10Y bond yields: 0.318% (down 0.31% from 02/05/17);

(-) EURGBP (M): AC, AO, CCI (20), Stochastic (5,3,3) - down;

(-) EURGBP (W): Stochastic (5,3,3), AO, AC, CCI (20) - down;

(-) EURGBP (D): AO, AC - down;

(-) EURUSD (D): AO, AC, CCI (20) - down.



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