EUR/USD: Stuck In Range Aggressive Rates Cuts by the Fed Might be Trend Defining.

EUR/USD continues to trade in consolidation falling odds of an aggressive easing by the US Federal Reserve (Fed) later this month. The ECB is widely expected to keep rates unchanged, but send out a strong dovish message later this week.

Ranging since May 2018

EUR/USD PRICE SENTIMENT

 TREND INDEXOB/OS INDEXVOLATILITY INDEX
15MBearishOversoldShrinking
1HBullishNeutralLow
4HStrongly BearishNeutralExpanding
1DBearishNeutralLow
1WStrongly BearishNeutralExpanding

THE FUNDAMENTALS

The EUR/USD pair once again failed near the 1.1280-85 supply zone and came under some heavy selling pressure on Friday. The shared currency was weighed down by a report from a German news magazine, Der Spiegel, suggesting the European Central Bank (ECB) was planning to resume its bond-buying program by November. The pair tumbled back closer to the 1.1200 handle and was further pressurized by resurgent US Dollar demand, supported by the fact that St. Louis Fed President James Bullard partly ruled out the possibilities of 50 bps rate cut at the July meeting.

Bullard said that a 25 bps rate cut seems appropriate as the current US economic condition doesn’t warrant a larger cut. It is worth reporting that bets for 50 bps Fed rate cut had surged following the New York Fed President John William’s comments on Thursday that indicated aggressive rate cut in the upcoming FOMC meeting on July 30-31, though walked back on hid dovish comments by saying that the speech was not about potential policy action at the upcoming meeting.

Nevertheless, the pair ended the day and the week in the red, albeit managed to defend the 1.1200 round figure mark and remained well within a broader trading range held over the past two weeks or so. Investors still seemed reluctant to place any aggressive bets and preferred to wait on the sidelines ahead of the highly anticipated central bank meetings. The ECB is scheduled to announce its latest monetary policy update later this week, which coupled with the flash Euro-zone PMI print will influence the market sentiment surrounding the shared currency. 

In the meantime, traders are likely to take cues from the Bundesbank’s monthly economic report and the USD price dynamics, which might produce some short-term opportunities on the first trading day of the week amid absent relevant market moving economic releases.

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