EUR/USD Faces Volatility Ahead of Fed Announcement
Updated
The EUR/USD pair kicked off the early European session on Wednesday with a downward push following a positive Tuesday, where the pair reacted to the 1.08400 level as previously anticipated. Now, as the market awaits the Federal Reserve's (Fed) policy announcements, traders brace for potential volatility in the currency pair.
The Fed is widely expected to maintain the policy rate unchanged at 5.25%-5.5% following the March policy meeting. However, market sentiment remains sensitive to any shifts in the Fed's tone or forecasts, particularly regarding future interest rate adjustments.
According to the CME FedWatch Tool, there is a 36% probability that the Fed will keep the policy rate unchanged in June. This suggests that investors are closely monitoring the Fed's statements for any signals of potential rate adjustments later in the year, which could impact the valuation of the US Dollar (USD).
Speculation is rife that the Fed may revise its quarterly forecasts and accompanying statement during the meeting, potentially altering the outlook for interest rates. This could lead to volatility in the EUR/USD pair as traders react to changes in the Fed's economic projections.
In the previous Summary of Economic Projections (SEP), officials forecasted three 25 basis points rate cuts in 2024. However, there are indications that this forecast could be revised down to reflect ongoing inflationary pressures. Analysts are closely watching for any adjustments in the "dot plot," which outlines the future path of rates as perceived by the Fed's Board of Governors.
Amidst this uncertainty, there is a probability that the EUR/USD could continue its descent towards the next key support level at approximately 1.0800. Traders are advised to remain vigilant and adjust their positions accordingly as the market reacts to the Fed's announcements.
*I have added a 1.0800 Buy limit and moved the SL to 1.07400
The Fed is widely expected to maintain the policy rate unchanged at 5.25%-5.5% following the March policy meeting. However, market sentiment remains sensitive to any shifts in the Fed's tone or forecasts, particularly regarding future interest rate adjustments.
According to the CME FedWatch Tool, there is a 36% probability that the Fed will keep the policy rate unchanged in June. This suggests that investors are closely monitoring the Fed's statements for any signals of potential rate adjustments later in the year, which could impact the valuation of the US Dollar (USD).
Speculation is rife that the Fed may revise its quarterly forecasts and accompanying statement during the meeting, potentially altering the outlook for interest rates. This could lead to volatility in the EUR/USD pair as traders react to changes in the Fed's economic projections.
In the previous Summary of Economic Projections (SEP), officials forecasted three 25 basis points rate cuts in 2024. However, there are indications that this forecast could be revised down to reflect ongoing inflationary pressures. Analysts are closely watching for any adjustments in the "dot plot," which outlines the future path of rates as perceived by the Fed's Board of Governors.
Amidst this uncertainty, there is a probability that the EUR/USD could continue its descent towards the next key support level at approximately 1.0800. Traders are advised to remain vigilant and adjust their positions accordingly as the market reacts to the Fed's announcements.
*I have added a 1.0800 Buy limit and moved the SL to 1.07400
Note
✅ Close 50% Volume and Move SL to entry Risk-freeNote
The EUR/USD closing the day significantly above 1.0940 on Wednesday after the FOMC ( as predicted..) Early Thursday, the pair maintained slight gains below 1.0950, with technical indicators suggesting a potential uptrend in the near future. Notably, the price appears to have found support within the green rectangle area, signaling a renewed bullish sentiment.
Later today, market focus will turn to key US economic releases, including the weekly Initial Jobless Claims and S&P Global's preliminary Manufacturing and Services PMI data for March. Meanwhile, US stock index futures indicate gains ranging between 0.4% and 0.9%. Barring any negative surprises from the data, continued optimism in the market following the Wall Street opening could keep the USD under pressure, further supporting the upward trajectory of the EUR/USD pair.
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