EUR/USD holds a strong bearish tone, after breaking decisively the 1.1120 area yesterday, where September lows were located. The pair continued to decline and before the FOMC minutes dropped to test the 1.1000 handle. So far it has been able to hold on top but still remains under pressure from a technical perceptive. The last time it traded under 1.1000 was back in late July.
Today not even better-than-expected Eurozone industrial production data offered some support to the pair, that continues to be affected by a stronger US dollar in the market.
Greenback is among the top performers in the market ahead of the minutes, with bond yields rising further to fresh multi-month highs and while US stock prices in Wall Street were shuffling between gains and losses.
FOCM minutes
At 18:00 GMT the Federal Reserve will release the minutes from the September 21 meeting. Back then, market consensus pointed toward no rate hike and that was what finally happened. The US central bank kept rates unchanged but with three FOMC members dissenting (they asked for a rate hike).
The meeting was followed by the release of new FOMC economic projections (dot plot) and by a press conference, so a lot about that meeting has already being said. Investors will read into the minutes for clues about the possible timing of the next move and how close is the Fed to raise rates again.
“Many investors are warming to the idea that the Fed will hike rates in December. Today's FOMC minutes will be looked at for fresh insight. The fact of the matter is there were three dissents to the FOMC statement in favor of an immediate hike, and subsequent comments suggest others were sympathetic. Both Yellen and Fischer have acknowledged it was a close call”, said analysts from Brown Brothers Harriman.
If the minutes sound “hawkish”, signaling that a rate hike is very likely the US dollar could receive an extra impulse. While on the contrary side, if the tone is perceived by market participants as “dovish”, signaling that there are still many risks of a rate hike, Greenback could retreat in the market.
The next meeting will be on November 2, a week before the US presidential elections. Most analysts expect no rate hike at that meeting and look into the December 14 meeting for a potential move. According to the FedWatch Tool from CME Group, the probability of a rate hike before year-end stands around 66%.
EUR/USD Levels to watch
The psychological support area round 1.1000 is exposed at the moment, and a boost to the US dollar could send EUR/USD below. The next relevant support could be seen at 1.0950 (July low). On the flip side, in the very short term a consolidation above1.1040 could give momentum to the euro, but as long as it remains under 1.1120, any upside moves could be considered as a correction.
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