- The EUR/USD appears to be severely oversold as it tests firm support.
- EUR/GBP is attempting to break above a minor resistance level; EUR/JPY appears to be heavy.
- What are the important levels to observe in significant Euro crosses and what is the outlook?
The euro appears to be severely oversold and may be poised to regain some of its recent losses against some of its peers ahead of the US Federal Reserve’s interest rate decision. It remains to be assessed how long the rebound will last.
Account: 10K challenge
Setup: HTF FU + QM
RR: 2.2r ( 2%)
First picture is the plan before London open.
Expected London sesh to make the low and accumulate below TDO, wanted to see it touch the H1 + OB and that is why I did not enter on… pic.twitter.com/oR2fhwYKly
— Polazzio_fx (@PolazzioFx) September 19, 2023
For the time being, hawkish statements from various ECB officials are boosting the single currency, and a potential delay by the Fed might provide a much-needed boost. Last week, the EUR was under pressure when the ECB hiked interest rates but signalled that policy rates had peaked. Money markets are already pricing in a 25% possibility of another ECB rate hike by the end of the year.
Meanwhile, the US Federal Reserve is largely expected to maintain the federal funds rate this week, with Powell likely to be cautious in his assessment, emphasizing the importance of data in determining the near-term path of policy.
The Summary of Economic Projections (SEP), which will be released alongside the September FOMC announcement, will be the main focus. The median policy rates for 2023 and 2024, in particular. More information is available in “How Will the US Dollar React to the Fed Rate Decision Next Week?” published on September 15.
The US dollar remains steady during early European trading as we await the Federal Reserve policy meeting. This week, several major central banks will make interest rate decisions. #USD #FederalReserve #interestrates #centralbanks pic.twitter.com/vgUeo0Cmy8
— Trader_Anun (@piyananfxT) September 19, 2023
While Powell is likely to be fair in his evaluation, highlighting the importance of data in determining the near-term course of policy, the US central bank is widely anticipated to maintain the federal funds rate at its current level this week.
The Summary of Economic Projections (SEP), which will be made public along with the September FOMC statement, will be the main topic of discussion. the median policy rates for 2023 and 2024 in particular. See the September 15 article “How Will the US Dollar React to Fed Rate Decision Next Week?” for additional information.
Having said that, for any bounce to be sustainable, the economic growth outlook for the Euro area needs to improve. The outperformance of US growth has been supporting the greenback globally as monetary policy outlooks converge.
The EUR/USD pair is testing a significant cushion at the June low of 1.0633 on technical charts. The likelihood of a short-term bounce is increased by consecutive weeks of decrease, oversold circumstances, and a positive reversal on the weekly charts. Given its strength, this support is unlikely to fail completely—at least not on the first try.
Fed Faces Familiar Foe as Oil Prices Threaten Growth, Inflation
The US central bank often downplays the inflation impact of higher oil.
The latest rise comes as consumers show incipient signs of strain.https://t.co/lnzG7WB1jg
— Yiannis Patrikakis (@patrikakis) September 19, 2023
Despite this, there is no upward momentum for the pair. For the immediate negative risks to diminish on the 240-minute charts, a break above the initial resistance level at last week’s high of 1.0770 is required. It would be much more noteworthy to break above the 1.0945 high from August, increasing the likelihood that the two-month slump was finished. The article “Euro’s Downside Cushioned Ahead of Euro Area CPI, US PCE: EUR/USD, EUR/GBP Action,” published on August 30, contains further commentary.
As it seeks to break through slight resistance at the August high of 0.8610, EUR/GBP appears to be flexing its muscles. A break above the July high of 0.8700 and timing it with the 200-day moving average would be much more meaningful, even though it is still substantial. A break in this direction might lead to the 0.8875 high from April.
— BESTBROKERFORME (@BESTBROKER4ME) September 19, 2023
The horizontal trendline support from August (around roughly 156.85-157.00) is being tested by the EUR/JPY pair. A double top (the August highs) could form on a break below, as was noted in the previous report, with a potential price goal of roughly 154.00.
The slide of the Japanese yen pauses, but for how long? Price Setups: USD/JPY, EUR/JPY, and MXN/JPY, published September 4. Despite this, any decline is unlikely to endanger the wider EUR/JPY uptrend as long as the cross maintains above the 151.50 low from July.