EUR/USD. June 15th. The chances of a “hawkish” FOMC decision are low
June 15, 2023 11:24 am
The EUR/USD pair reversed in favor of the euro on Tuesday and resumed its upward movement. The pair’s price holding above the corrective level of 50.0% (1.0784) increases the probability of further growth toward the next Fibonacci level at 61.8% (1.0843). Closing quotes below the level of 1.0784 would favor the US dollar and result in a decline toward the corrective level of 38.2% (1.0726).
Yesterday was a crucial day for the dollar as 50% of the fate of today’s FOMC rate decision depended on the inflation report for May. This report both pleased and disappointed traders. It pleased economists and the FOMC because inflation slowed more than expected, reaching 4% in May. The core inflation also decreased, albeit slower, stabilizing at 5.3%. Thus, the debate regarding whether the Fed’s interest rate will be raised today can be concluded. In recent weeks, most FOMC members have held the view of raising the rate once every two meetings. However, the rate can increase one more time if the consumer price index requires additional stimulus for reduction. Therefore, there are no reasons to tighten monetary policy after the June meeting.
This is bad news for the US dollar as its growth largely depends on the Fed’s stance. Yesterday, the consumer price index for May in Germany was released, showing 6.1%, which is 0.9% lower than in April. However, overall inflation in the European Union, specifically in Germany, is one and a half times higher than in the United States. Therefore, regarding the European Central Bank, one cannot conclude a likely pause in tightening monetary policy. However, we should not expect a strong rate increase in the European Union either.
On the 4-hour chart, the pair reversed in favor of the euro and may continue its upward movement toward the Fibonacci level of 50.0% (1.0941). Today, a bearish divergence appeared on the CCI indicator, suggesting a potential downward movement toward the level of 1.0610. However, the divergence is weak, while the information background is strong. The level of 1.0941 is quite far away, so potential selling signals should be monitored on the hourly chart.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 5,757 long contracts and opened 1,547 short contracts. The sentiment of large traders remains bullish and is strengthening once again. The total number of long contracts held by speculators now amounts to 236,000, while short contracts total only 77,000. Currently, a strong bullish sentiment is maintained, but the situation will continue to change soon. The euro has been declining over the past month. The high value of open long contracts suggests that buyers may start closing their positions soon (or may have already started, as indicated by the latest COT reports). There is currently an imbalance heavily favoring the bulls. The current figures allow for a further euro decline soon. However, this week much will depend on the Fed.
News Calendar for the United States and the European Union:
EU – Industrial Production Volume (09:00 UTC).
US – Producer Price Index (PPI) (12:30 UTC).
US – Federal Reserve Interest Rate Decision (18:00 UTC).
US – FOMC Economic Projections (18:00 UTC).
US – FOMC Statement (18:00 UTC).
US – FOMC Press Conference (18:30 UTC).
On June 14, the economic events calendar includes several entries, with the Federal Reserve meeting being the highlight. The impact of the information background on trader sentiment today can be significant.
Forecast for EUR/USD and trader advice:
Sell positions can be opened if the pair consolidates below the level of 1.0784 on the hourly chart, with a target of 1.0726. I advised buying the pair if it closes above the level of 1.0784 on the hourly chart, with a target of 1.0843. These trades can now be kept open until a close below 1.0784.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD pair reversed in favor of the euro on Tuesday and resumed its upward movement. The pair’s price holding above the corrective level of 50.0% (1.0784) increases the probability of further growth toward the next Fibonacci level at 61.8% (1.0843). Closing quotes below the level of 1.0784 would favor the US dollar and result in a decline toward the corrective level of 38.2% (1.0726).
Yesterday was a crucial day for the dollar as 50% of the fate of today’s FOMC rate decision depended on the inflation report for May. This report both pleased and disappointed traders. It pleased economists and the FOMC because inflation slowed more than expected, reaching 4% in May. The core inflation also decreased, albeit slower, stabilizing at 5.3%. Thus, the debate regarding whether the Fed’s interest rate will be raised today can be concluded. In recent weeks, most FOMC members have held the view of raising the rate once every two meetings. However, the rate can increase one more time if the consumer price index requires additional stimulus for reduction. Therefore, there are no reasons to tighten monetary policy after the June meeting.
This is bad news for the US dollar as its growth largely depends on the Fed’s stance. Yesterday, the consumer price index for May in Germany was released, showing 6.1%, which is 0.9% lower than in April. However, overall inflation in the European Union, specifically in Germany, is one and a half times higher than in the United States. Therefore, regarding the European Central Bank, one cannot conclude a likely pause in tightening monetary policy. However, we should not expect a strong rate increase in the European Union either.
On the 4-hour chart, the pair reversed in favor of the euro and may continue its upward movement toward the Fibonacci level of 50.0% (1.0941). Today, a bearish divergence appeared on the CCI indicator, suggesting a potential downward movement toward the level of 1.0610. However, the divergence is weak, while the information background is strong. The level of 1.0941 is quite far away, so potential selling signals should be monitored on the hourly chart.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 5,757 long contracts and opened 1,547 short contracts. The sentiment of large traders remains bullish and is strengthening once again. The total number of long contracts held by speculators now amounts to 236,000, while short contracts total only 77,000. Currently, a strong bullish sentiment is maintained, but the situation will continue to change soon. The euro has been declining over the past month. The high value of open long contracts suggests that buyers may start closing their positions soon (or may have already started, as indicated by the latest COT reports). There is currently an imbalance heavily favoring the bulls. The current figures allow for a further euro decline soon. However, this week much will depend on the Fed.
News Calendar for the United States and the European Union:
EU – Industrial Production Volume (09:00 UTC).
US – Producer Price Index (PPI) (12:30 UTC).
US – Federal Reserve Interest Rate Decision (18:00 UTC).
US – FOMC Economic Projections (18:00 UTC).
US – FOMC Statement (18:00 UTC).
US – FOMC Press Conference (18:30 UTC).
On June 14, the economic events calendar includes several entries, with the Federal Reserve meeting being the highlight. The impact of the information background on trader sentiment today can be significant.
Forecast for EUR/USD and trader advice:
Sell positions can be opened if the pair consolidates below the level of 1.0784 on the hourly chart, with a target of 1.0726. I advised buying the pair if it closes above the level of 1.0784 on the hourly chart, with a target of 1.0843. These trades can now be kept open until a close below 1.0784.
The material has been provided by InstaForex Company – www.instaforex.com
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