On Tuesday the 25th of September, trading on the euro closed up. The daily candlestick closed above the hourly balance line. The euro rose to 1.1792 against the background of a decline in US bond yields. After reaching 3.11%, 10-year yields took a southerly turn. It is unclear what caused its decline, since the Fed is expected to raise rates today, and US consumer confidence significantly exceeded expectations, reaching its highest level in 18 years. The previous reading was revised upwards.
Day's news (GMT 3):
- 11:00 Switzerland: ZEW survey - expectations (Sep).
- 11:30 UK: BBA mortgage approvals (Aug).
- 16:00 Switzerland: SNB quarterly bulletin.
- 17:00 US: new home sales change (MoM) (Aug).
- 17:30 US: EIA crude oil stocks change (Sep 21).
- 21:00 US: FOMC economic projections, Fed's Powell speech, Fed's monetary policy statement.
- 21:30 US: FOMC press conference.
- 00:00 New Zealand: RBNZ interest rate decision, RBNZ rate statement, monetary policy statement.
Fig 1. EURUSD hourly chart.
The correction exceeded expectations. Therefore, a triangular formation appeared. It's not exactly a triangle, however, as the waves do not correspond to the wave structure, so don't even try to jump the gun by trying to look for one here. For me, a triangular formation isn't a triangle in a wave analysis, but simply a tapering formation - nothing more.
A two-day US Fed meeting kicked off yesterday, and the results are to be announced at 21:00 (GMT 3). According to the CME FedWatch Tool, the probability of a rate increase of 25 base points is 95%. Currently, the range for the rate is 1.75-2.00%. Forecasts for further rate increases will be of interest for traders, and the probability of a December rate hike is 78.8%.
Many euro crosses are on the side of sellers. By the close of the US session, I expect the euro to sit at 1.1738. Take a look at 10-year US bond yields. They are now declining. If this continues, then the fall of the euro will be slowed. On the other hand, the pair could remain at the balance line. Today there will be high volatility during the head of the US Federal Reserve's speech. Given that the borders of the range are becoming more narrow, price fluctuations could reach 100 pips. Powell will either send the EURUSD pair down, or create the conditions for its further growth.