EUR/USD Forecast 18/09: Pulls Back Before FOMC (Video)

(MENAFN- Daily Forex)

• The Euro has pulled back just a little bit during the early hours here on Wednesday as we wait for the FOMC interest rate decision, the press conference, the statement, the whole circus that is generally an interest rate decision that is important.
• Really at this point in time, everybody is expecting the Federal Reserve to cut interest rates by 25 basis points.
• And that has clearly been priced into the market for some time. Federal funds predict that we could see as many as three interest rate cuts or a total of 75 basis points between now and the end of the year.

And that is what we're going to be paying attention to the Federal Reserve doesn't sound like it's in the mood to cut three times between now and New Year's Day, there will be an adjustment, there will be US dollar strengthening. If they sound panicked, like they're truly concerned that the economy is getting worse, the US dollar probably turns around and strengthens quite a bit against the euro. Eventually, it may not be an immediate thing, but sooner or later, people start buying US treasuries. It's the only place where you can stuff a billion dollars into a market quickly and get it out quickly. It's just the law of large numbers coming into play.

Powell Has to“Thread the Needle”

That being said, if the interest rate decision is a cut and there are at least one or two cuts coming down the road, but it's more measured, it's not any type of concern, the verbiage in the statement isn't one that causes panic, then the Euro probably climbs to the 1.20 level. It's days like these that are some of the hardest to trade because you're trading what the market perceives out of the statement. It isn't simple if support breaks, you short a market or if resistance breaks, you buy a market.

EURUSD Chart by TradingView

It's a little bit more nuanced and therefore it's going to be a bit more troublesome. As things stand right now, the euro is obviously in an uptrend. So, one would assume that it favors buying on the dip, but we'll see if we turn around and wipe out the candlestick from the surge higher on Tuesday, that would be a very ugly turn of events. More likely than not, the wise play is to see how the day closes. Trading will be hard during the actual press conference because the volatility will be through the roof. The volume will be very thin.

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