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    FOMC minutes: What to expect of EUR/USD? Matías Salord

    The EUR/USD  pair dropped at the beginning of the American session to 1.1026, the lowest level in six days and then bounced to the upside erasing losses. The recovery from the lows so far was not strong enough to bring the price back above 1.1100.Something new?The minutes from the June 14/15 FOMC meeting will be released at 18:00 GMT. The Fed decided then leave interest rate unchanged and gave no clues about the future of monetary policy. After the meeting and the UK referendum, the odds of a rate hike during 2016  evaporated.The document from the meeting is not likely to add much information to investors, considering that Janet Yellen gave a press conference after the decision and since then she spoke at the Congress. Also, the Brexit referendum lead to a change in the current market environment and to a new global situation.The Research Team at TDS  suggests that given that the dynamics underpinning Fed policy have been overtaken by the post-Brexit events, the minutes are likely to be somewhat stale. If it contains surprises, the US dollar should be affected. A “dovish” minutes would favor the upside in the EUR/USD while a hawkish tone could send the pair below 1.1020.According to analysts from Brown Brothers Harriman, the minutes “tend to obscure the signal that emanates from the Fed’s leadership with a cacophony of voices”.Sal Guatieri, Senior Economist at BMO Capital Markets, affirmed that monetary policy in the US in the near term its headed “absolute nowhere”. He suggested that with fed funds futures leaning slightly toward a rate cut, “there is some interest in whether policymakers gave this option serious consideration in the event of Brexit, and, if so, what are the trigger points.”EUR/USD levels to watchAhead of the minutes, EUR/USD is experiencing a modest recovery after yesterday’s correction that took place from the highest level in 10 days at 1.1186. The decline changed the very short-term outlook back to bearish.If the euro manages to rise back above 1.1120 it could remove bearish pressure but in order to gain support for an extension of the recovery after the Brexit decline, it needs to consolidate above 1.1160.As long as it remains under 1.1080, EUR/USD risks are likely to be tilted to the downside and another test to daily lows at 1.1020/25 seems probable; a break lower would add pressure to the euro. Below the next support levels might be seen at 1.0970 (June 27 low) and 1.0910 (June 24 low).

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