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Top 5 Events: March Fed Meeting Minutes & EURUSD Price Outlook

Top 5 Events: March Fed Meeting Minutes & EURUSD Price Outlook

2019-04-10 06:00:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Talking Points:

- The minutes from the March Fed meeting is due on Wednesday, April 10 at 18:00 GMT.

- The March Fed meeting saw the FOMC eliminate plans to raises rates in 2019, as well as end its balance sheet reduction process sooner than expected.

- Retail traders remain net-long EURUSD, but recent positioning changes suggest that prices may mean that prices reverse higher soon.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

04/10 WEDNESDAY | 18:00 GMT | USD March FOMC Meeting Minutes

The Federal Reserve’s March meeting hit markets like an earthquake. Between the decision to eliminate the prospect of a 25-bps rate hike in 2019 as well as end the balance sheet reduction process later this year, traders were caught off guard. Citing a weakening economic backdrop in the United States thanks to the US government shutdown, coupled with a challenging global environment weighed down by trade tensions, the Fed took what some may consider a surprisingly dovish stance.

Significant dislodgements across asset classes – currencies, bonds, equities, commodities – led to the most volatile day of price action in all of 2019. Yet no less than 48-hours after the March Fed meeting, the FX markets kicked into reverse and saw all the Fed-induced US Dollar losses unwind.

In the weeks since, US growth expectations have continued to rebound, up from 0.5% annualized on the day of the March Fed meeting to 2.1% on April 5, according to the Atlanta Fed GDPNow Q1’19 growth tracker (the NY Fed Nowcast is less bull, at 1.5%). As such, the rationale behind the Fed’s latest decisions will come under a microscope this Wednesday; in turn, greater than normal volatility in USD-pairs should be anticpated.

Pairs to Watch: DXY Index, EURUSD, USDJPY, Gold

EURUSD Price Chart: Daily Timeframe (December 2017 to April 2019) (Chart 1)

eurusd price chart, eurusd price forecast

EURUSD's turn higher from last week has seen price settle near its daily 21-EMA ahead of the Fed minutes. While both daily MACD and Slow Stochastics remain in bearish territory, they have turned higher, continuing to work off divergences between price and the indicators. Put in context of the DXY Index's bearish evening star candle cluster, there may still be upside in EURUSD yet.

IG Client Sentiment Index: EURUSD (April 10, 2019) (Chart 2)

igcs, ig client sentiment index, eurusd price chart

Retail trader data shows 63.5% of traders are net-long with the ratio of traders long to short at 1.74 to 1. In fact, traders have remained net-long since Mar 26 when EURUSD traded near 1.12738; price has moved 0.1% lower since then. The number of traders net-long is 1.6% lower than yesterday and 11.2% lower from last week, while the number of traders net-short is 0.1% higher than yesterday and 35.4% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse higher despite the fact traders remain net-long.

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Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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