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EUR/USD Vulnerable to Renewed USD Volatility as FOMC Decision Nears

EUR/USD Vulnerable to Renewed USD Volatility as FOMC Decision Nears

Nick Cawley, Senior Strategist
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EUR/USD Price, Chart, and Analysis

  • EUR/USD is likely to remain with a Fibonacci range.
  • Retail traders continue to top up long positions.

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Last Thursday’s post-ECB euro rally has now been given back with EUR/USD now back below 1.1600 and likely to remain under pressure with this Wednesday’s Fed meeting expected to see the start of a bond tapering program. The Fed meeting is one of four important central bank policy meetings this week with the RBA announcement tomorrow and the BoE and Norges bank on Thursday. All of these meetings are live with the Norges bank seen preparing the ground further for a rate hike in December, while the BoE meeting is a 50/50 call on a 15bp rate hike. While these major central banks are/will be embarking on a course of monetary tightening, the ECB is still a long way from reducing bond-buying or hiking interest rates. As the yield differential grows between the Euro and other major currencies, the value of the single currency will continue to dwindle.

Earlier today, German retail sales missed expectations, weighing on the Euro, while last week the German government downgraded growth to 2.6% this year from an original forecast of 3.5% citing higher energy prices and shortages of raw materials. With Europe’s largest economy slowing, the ECB will have a difficult task to begin normalizing policy any time soon.

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The daily EUR/USD chart shows the pair trading just above a recent 16-month low at 1.1523. With the pair also now trading below all three simple moving averages, a re-test of this low is looking increasingly likely.

Euro (EUR/USD) Daily Price Chart November 1, 2021

A look at the weekly chart shows EUR/USD now trapped within a Fibonacci trading range of 1.1446 and 1.1710. This range is expected to hold in the short term.

Euro (EUR/USD) Weekly Price Chart November 1, 2021

Retail trader data show 66.75% of traders are net-long with the ratio of traders long to short at 2.01 to 1.The number of traders net-long is 7.24% higher than yesterday and 8.04% higher from last week, while the number of traders net-short is 14.05% higher than yesterday and 26.44% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 14% 3% 10%
Weekly 14% -17% 0%
What does it mean for price action?
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What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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