EUR/USD settles in the middle of the consolidation range post ECB and in anticipation of the FOMC

EUR/USD fundamentals

EUR/USD has had an interesting week, to say the least. There have been Brexit woes to deal with but the pair managed to hold up after the ECB meeting. The market's attention was on if the ECB would mention the recent appreciation in the EUR. ECB president Lagarde said the ECB members have noted the recent strength in the single currency but there was not really any policy changes to address the situation. This comes even as the Eurozone entered into a deflationary period and this is one of the ECB's mandates to control inflation (current target 2%).

The latest set of Brexit talks ended in failure, Both Barnier and Frost (chief negotiators) had similar feelings that the 8th round of talks didn't really move too much in the right direction. They are due to speak in Brussels next week but how much hope is there for any progress?. The UK market internal paper is set to go to parliament next week but as it breaks international law it may not pass. Although Boris Johnson holds an 80 seat majority it has been said in the UK press that as many as 30 of them do not agree with the bill.

On the flip side of the pair, next week the market will get the latest policy announcements from the FOMC. They are not expected to move on rates but it will be interesting to get more explanation about the new inflation targeting and at what stage the unemployment rate will need to be before they consider raising rates. At the moment, none of the FOMC members expects to rates moving until 2021. 

EUR/USD 4-hour chart

Looking at the chart, the price rise following the ECB meeting stopped exactly at the 61.8% Fibonacci retracement level. Despite all the fundamental events the price as ended the week flat. There is now a floor and ceiling level at the black and red horizontal lines. The area that the price is in at the moment is very sticky as it has had many touches during this consolidation period. The price will probably stay in this zone until the Fed meeting on 16th September. The indicators are both in the mid-zone too. The Relative Strength Index is near the 50 zone and the MACD is flat with the histogram just about in the green but the bars are diminishing. 

Additional levels