EUR/USD Forecast: it's all about the FED… again
|Markets have been quite active during this past week, although you wouldn't tell, just watching at the EUR/USD pair, which remained lifeless during the first four days. The release of US inflation for August, better-than-expected, shook a bit the EUR/USD, but barely, considering the price is some 40 pips below the base of a weekly range of just 80.
The US Federal Reserve is having a "live meeting" next Wednesday, one of those than include not just a decision, but also previsions and a press conference, and is indeed the main event of the week, with the BOJ´s meeting being also in the eye of the storm and taking place a few hours later.
The FOMC is expected to remain on hold, despite the strong words offered by Janet Yellen in her opening remarks at the Jackson Hole Symposium, as policy makers are split over the timing of a rate hike. Previous meeting's statement proved it, and Lael Brainard brought it back last Monday, when she asked for " prudence in the removal of policy accommodation." She referred to still-muted inflation as one of the reasons behind such need.
Friday's data however, showed that the US inflation ticked higher in August, reviving hopes for a rate hike as soon as next week. According to official figures, the US CPI increased by 0.2% in August on a seasonally adjusted basis, and by 1.1% before seasonal adjustment over the last 12 months. Still, a swallow does not make a summer, and inflation has been sluggish for long enough to suggest that the FED will stay pat.
Anyway, chances of a December rate hike have been on the rise, and are now above the 50%. Markets will be looking for a hawkish stance from the FED to confirm it, and can rush back into de greenback with it, in spite no action being taken.
From a technical point of view, and according to the daily chart, not much definitions have been made over these last few days. as the price is still moving back and forth around horizontal moving averages. The Momentum indicator has turned lower, but remains stuck around its 100 level, while the RSI heads south around 44. The downside seems favored, but given the limited weekly range, is a too early call. In weekly chart, technical indicators head nowhere around their mid-lines, whilst the price remains stuck around its 20 and 100 DMAs. Furthermore, the pair is now trading around the September´s opening level, with the monthly chart showing, so far, two consecutive dojis, all of which indicates the complete absence of a directional trend.
A huge trigger is needed to take the pair out of its wider range between 1.0840 and 1.1460, in place since early 2015, and the FED won't be enough, unless they actually raise rates.
As for the levels to watch, 1.1120, August 31st low is the immediate support, with a break below it exposing a long term daily ascendant trend line coming from 1.0505, at 1.1060. Below this last, the pair can shed additional 100 pips, and test the 1.0940/60 region.
The immediate resistance comes at 1.1200, followed by 1.1280 region, a daily descendant trend line coming from 1.1615. Beyond this last, 1.1365, August monthly high is the next resistance, followed by the major static resistance around 1.1460.
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