empty
 
 
25.06.2019 08:34 AM
EUR / USD: Market waits for the Fed speech ( Level of 1.1420 - not the limit)

The US currency continues to lose its positions: the dollar index reached two-month low today. This figure is systematic but surely, it is heading for the area of 94 points. However, the yield of 10-year-old treasurers has updated the perennial lows and reached 1.988%. The last time the indicator at such lows was in the fall of 2016.

The market is clearly worried about the prospect of a Fed interest rate cut. Among experts, there are increasing speculations that the regulator may cut the rate in July by 50 basis points at once. According to another version, the Fed will soften the conditions of monetary policy in July and in September, while continuing the rate reduction cycle next year. Such rumors, which are fueled by the "dovish" comments of some members of the Federal Reserve, put strong pressure on the dollar, including the major pair with euro. The EUR/USD pair has been testing the 14th figure for the second day, approaching the resistance level of 1.1420 at the top line of the Bollinger Bands indicator on the daily and weekly charts. If today Jerome Powell even allows the option of a double rate cut this year, then the dollar bulls will finally lose their footing.

This image is no longer relevant

It is notable that the next strongest price barrier is already at a height of 1.1890, which was the upper limit of the Kumo cloud on the weekly chart. Of course, it is too early to talk about such heights but at the same time, we should not forget that the euro/dollar pair fell from 1.23 to 1.13 in just 4 months (from April to August) last year. This guided mainly Fed intentions to raise rates. Now we are seeing a mirror picture as the growth scenario of EUR/USD to the area of 20 figures do not look fantastic, especially against the background of the restrained position of the European Central Bank for the time being.

However, it is worth to mention that there is one "but" in this scenario. According to the overwhelming majority of experts, the European Central Bank will also follow the example of the Fed and will soon soften its monetary policy. The most hawkish scenario in this context is the waiting position of the ECB when members of the European regulator declare the need to keep the interest rates at the current level for a "longer period". Let me remind you that at the moment, the market expects an increase in the rate approximately in the second half of next year. However, if the Central Bank adjusts the forecast of its planned actions then these expectations will move to 2021. Again, this scenario is most favorable for EUR/USD bulls. All other options suggest mitigation of monetary policy parameters.

In particular, the European Central Bank may reduce the deposit rate and introduce a multi-level system with certain conditions. According to other experts, the regulator may return to the program of quantitative easing. This is not about any long-term period as currency strategists believe that the ECB will consider this issue either at the next meeting or at the beginning of autumn. Mario Draghi did not rule out the implementation of such scenarios during his last speech. According to him, everything will depend on the incoming data. In this context, Friday figures will play an important role. We are talking about key data on the growth of European inflation. According to forecasts, core inflation will show signs of recovery, rising to 1% from the previous of 0.8%. On the contrary to forecasts, if the core consumer price index will again disappoint the market.

Also, traders are waiting for the main event of this week, and perhaps, the month of the G-20 summit. But according to some experts, its results will not change the intentions of the Fed, as well as the ECB -at least in the medium term. Therefore, the current macroeconomic statistics, as well as the comments of the heads of the Fed and the ECB, will have a strong influence on the EUR/USD pair, which determines the price movement vector. Tonight at 17:00 Coordinated Universal Time, Fed Chairman Jerome Powell will take part in the New York Economic Forum, where he will speak on economic prospects and monetary policy. His rhetoric could give the couple a northern impulse - if only he allowed further easing of monetary policy this year.

This image is no longer relevant

The technical picture of the EUR/USD pair also speaks in favor of moving upward. On the daily chart, the pair is above the Kumo cloud of the Ichimoku Kinko Hyo indicator and above all its lines. The bullish signal of "Parade of lines" indicates the potential for further price growth. In addition, the pair is located on the top line of the Bollinger Bands indicator. This also indicates the bullish sentiment of traders. The nearest target of the upward movement can be considered the mark 1.1420 - this is the upper line of the Bollinger Bands indicator on the D1 and W1 timeframes. Stop-loss can be located in the area of the support level at 1.1290, which is the Tenkan-sen line on the daily chart.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Can't speak right now?
Ask your question in the chat.
Widget callback