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  • The US Dollar seems to be back on the offensive against its major counterparts, pressuring EUR/USD and NZD/USD lower as USD/JPY consolidates. USD/CHF surges past key resistance. Get your market update from @ddubrovskyFX here:https://t.co/MrLGSp7FYa https://t.co/XS0176LyOg
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  • Google finance-related search interest in 'Evergrande' has almost overtaken 'Covid'. 'Taper' doesn't even register on the scale https://t.co/P6H9sHFVIB
  • Gold prices gain as potential systemic risks out of China's Evergrande Group roil broader markets. Meanwhile, iron ore is ticking higher after a big drop on Monday as China steps up steelmaking curbs. Get your market update from @FxWestwater here:https://t.co/l4kAWDJ2wm https://t.co/b9m5ADIqqb
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  • GBP/USD has flattened overnight after its strongest rally in a month on Thursday. The British currency has been under pressure recently as an energy crisis has caused a number of gas providers to go bankrupt. Get your market update from @HathornSabin here:https://t.co/3D8s2eIVWv https://t.co/JDGNwKYyOn
  • Japanese candlesticks are a popular charting technique used by many traders, and the shooting star candle is no exception. Learn about the shooting star candlestick and how to trade it here: https://t.co/mfwJ0sIauS https://t.co/JIT5it2HAt
  • Gold could suffer further near-term losses due to rising U.S. Treasury yields and a weak technical picture for price action. Get your weekly gold forecast from @DColmanFX here: https://t.co/g9QvH3L4It https://t.co/Vz98E0Bl9U
  • Gold has been trending lower after failing to clear resistance in the $1835 area earlier this month. Get your $XAUUSD market update from @DColmanFX here:https://t.co/3hm1g3BHgf https://t.co/MdTQKEBCBx
  • Key break here in the 10-year #Treasury yield as it rises to the highest since late June Took out 1.4230 resistance, and the 100-day SMA Eyes now on the 38.2% Fib extension at 1.4775 Also potential falling resistance from March https://t.co/4cI6l210ui
EUR/USD FOMC Game Plan- Outlook Constructive Within this Formation

EUR/USD FOMC Game Plan- Outlook Constructive Within this Formation

Michael Boutros, Strategist

Talking Points

  • EUR/USD Rebound at risk into FOMC- outlook constructive above 1.0560
  • Updated targets & invalidation levels
  • Click Here to be added to Michael’s email distribution list.

EUR/USD Daily

EURUSD Daily Chart

Technical Outlook: Back on December 7th we highlighted that, “Therebound off the lower median-line parallel of a modified pitchfork formation dating back to the yearly highs shifts the focus higher in EURUSD,” with the post-ECB sell-off making yet another defense of the December 2015 low at 1.0517. The pair posted an outside-day reversal off support to open the week with the subsequent rebound testing near-term resistance here at the 50-line. Although the immediate topside bias is at risk, the trade remains constructive while above the weekly opening-range low.

EUR/USD 120min

EURUSD 120min Chart

Notes: A close look at price action highlights a newly identified slope formation off the recent lows with the exchange rate stretching into near-term confluence resistance at 1.0658 early in NY trade. The risk is for a pullback from here but ultimately I would be looking fade weakness (buy a dip) into the lower parallel with interim support seen at the monthly open at 1.0587 & ~1.0565. A break below this mark invalidates the reversal play with such a scenario shifting the focus to subsequent support objectives at 1.0517 & 1.0466.

A topside breach targets the 1.07-handle & 1.0740- a rally surpassing this confluence resistance level would be needed to suggest a more meaningful rebound is underway. Keep in mind the FOMC is widely expected to hike interest rates by 25bps (already priced in) and the major focus will be on the future outlook for monetary policy heading into 2017. Also note we’ll be getting the updated assessment from the committee members with projections on growth, inflation, unemployment & the all-important interest rate dot plot. Follow the real-time news feed for live updates during the release.

EURUSD Speculative Sentiment Index

EURUSD SSI

A summary of the DailyFX Speculative Sentiment Index (SSI) shows traders are long EUR/USD- the ratio stands at +1.31. While the current SSI profile remains bearish, it’s important to note that the pullback in long positioning from the November extreme of 2.55 has been accompanied by a broader turn in the exchange rate and a flip to net-short in the coming days could invalidate the near-term bearish outlook. That said, I’ll be looking for a continued build in short positioning to suggest a more significant low may be in place.

Relevant Data Releases

EUR/USD FOMC Game Plan- Outlook Constructive Within this Formation

Looking for trade ideas? Review DailyFX’s 2016 4Q Projections

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

Join Michael for Live Weekly Trading Webinars on Mondays on DailyFX at 13:30 GMT (8:30ET)

FollowMichael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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

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