FOMC Game Plan - EUR/USD Constructive Above Monthly Open at 1.1128

2016-06-14 19:25:00 Michael Boutros, Strategist

Talking Points

EUR/USD short-bias at risk into the monthly open ahead of FOMC
Updated targets & invalidation

EURUSD 30min

Chart prepared by Michael Boutros

Technical Outlook: Back on June 1st we noted that the, “short-side (was) vulnerable heading into the ECB interest rate decision and although we cannot rule out another drop into key support, we’re generally looking for a low around these parts for the euro.” Indeed euro rallied in the subsequent days with the pair turning just ahead of the 61.8% retracement a 1.1417.

Euro is trading within the confines of a pitchfork extending off the April & May highs (blue) with the pair pivoting below the median-line in Asia trade last night. The immediate range in focus heading into tomorrow’s key FOMC policy meeting is 1.1165-1.1255.

The bottom end of this range is defined by the confluence of 76.4% retracement of the most recent advance and slope support dating back to the December lows. A break below this mark targets the monthly open at 1.1128 – I would be on the lookout for resistance triggers / long-entries into this region. A break / close below the 200-day moving average (currently ~1.1100) is needed to invalidate the broader December rally.

A breach above the weekly open at 1.1282 shifts the focus back to the topside with such a scenario eyeing subsequent topside objectives at 1.1335, the October high-day reversal-close at 1.1385 & 1.1418. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Deskand take advantage of the DailyFX New Subscriber Discount.

Avoid the pitfalls of near-term trading strategies by steering clear of classic mistakes. Review these principles in the "Traits of SuccessfulTraders” series.

A summary of the DailyFX Speculative Sentiment Index (SSI)shows traders are net short EURUSD- the ratio stands at -1.10(48% of traders are long)-weak bullishreading
Yesterday the ratio was -1.25; Long positions are 3.5% higher than yesterday and 4.1% above levels seen last week
Traders have remained short since June 3rd – (EURUSD post NFP rally)
Open interest is 3.3% lower than yesterday and 11.2% below its monthly average
SSI is coming off recent extremes in bearish sentiment & suggests that the pair remains at risk for a rebound higher from these levels near-term. From a trading standpoint, I would be looking for a post-FOMC low into support to buy.