Talking Points:
- US Dollar Declines to New Lows Ahead of FOMC
- EUR/USD Trades to New 2017 Highs
- EUR/USD Sentiment Reaches New Extremes; IGCS Remain at -3.50
For Wednesday’s webinar the US Dollar remains in focus as prices have declined to new yearly lows ahead of today’s FOMC rate decision. This event should be considered high importantce and expectations are set to see a rate hike to 1.25%. With such a big event on the horizon traders should continue to look for increased volatility from US Dollar based pairs throughout the session.
The EUR/USD, AUD/USD, and USD/JPY are three currencies to watch during today’s event. Currently the EUR/USD is trading just off of new 2017 highs at 1.1295. As seen in the graph below the pair remains above both its 10 day EMA (exponential moving average) and 200 day MVA (simple moving average). If prices breakout higher, traders should look for a price close above the November 2016 high at 1.1299. Alternatively if prices reverse lower, traders should look for a decline back below the 10 day EMA at 1.1225.
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Daily EUR/USD Chart with Averages
(Chart Prepared by Walker England)
Sentiment for many US Dollar pairs are pushing to extremes on this morning’s move. The EUR/USD remains at extremes with IG Client Sentiment reading at -3.50. This value suggests that 78% of traders are net-short the pair. Typically when read as a contrarian indicator, this suggests that the EUR/USD may trade higher. If prices decline during today’s news traders should begin to see sentiment figures neutralize from their current readings.
Alternatively the USD/JPY reads at a positive extreme of +2.49. This reading suggests that 71% of traders are currently net-short the currency pair. In the event that the USD/JPY trades to new lows, traders should for sentiment values to stay near their present positive values. Alternatively if the USD/JPY trades higher, traders should look for sentiment totals to neutralize.
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--- Written by Walker, Analyst for DailyFX.com
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