The Euro is trading lower against the U.S. Dollar on Tuesday with the current intraday chart pattern suggesting trader indecision and impending volatility ahead of the start of the Federal Reserve’s two-day policy meeting later today. Last Thursday, the European Central Bank ECB came out with a dovish monetary policy statement, on Wednesday the Fed is not expected to be dovish per se and will probably announce it had discussed tapering its current bond buying program.
That being said, the Euro is still the weaker of the two currencies, but we still have to assume that this outlook has already been priced in ahead of the Fed, which may be the reason prices have been consolidating the last three sessions. In other words, investors know the Euro is bearish, they just want to know how bearish based on what the Fed has to say.
At 11:16 GMT, the EUR/USD is trading 1.1791, down 0.0012 or -0.10%.
Ahead of the Fed meeting, some traders are saying that more gains for the dollar are in store if the Fed strikes a hawkish note at the outcome of a two-day policy meeting on Wednesday although market consensus believes that is unlikely.
Stephen Jen, a hedge fund manager, took it one step further saying, “…, if Euro/Dollar breaks below 1.17, there could be large capitulation trades sending the cross to the 1.11-1.13 zone later this year.”
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through 1.1881 will change the main trend to up, while a move through 1.1752 will signal a resumption of the downtrend.
The minor trend is up. This is creating just enough upside momentum to keep the EUR/USD afloat at current price levels. Taking out 1.1830 will indicate the buying is getting a little stronger, while a trade through 1.1755 will be a sign of renewed weakness after four days of consolidation.
The minor range is 1.1752 to 1.1830. The EUR/USD is currently straddling its 50% level or pivot at 1.1791.
The short-term range is 1.1881 to 1.1752. Its 50% level at 1.1817 is providing resistance.
The main retracement zone resistance is 1.1864 to 1.1890.
Daily Swing Chart Technical Forecast
The direction of the EUR/USD on Tuesday is likely to be determined by trader reaction to 1.1791.
A sustained move over 1.1791 will indicate the presence of buyers. The first two upside targets are 1.1817 and 1.1830. Taking out the latter could trigger an acceleration into 1.1864 to 1.1890.
A sustained move under 1.1791 will signal the presence of sellers. This could trigger a quick break into 1.1755 to 1.1752. If 1.1752 fails to hold then look for the EUR/USD to continue to slide into the March 31 bottom at 1.1704.