On Tuesday the 20th of March, trading on the EURUSD pair closed down. The euro was driven down by weak data from Germany and the Eurozone, as well as a broadly resurgent dollar in light of a rise in US bond yields and a collective adjustment of positions in anticipation of the FOMC meeting.
US10Y bond yields have jumped from 2.95% to 2.90%. The EURUSD pair has shed 114 pips to reach 1.2240. This sees buyers erase all the gains made on the 19th of March.
Day’s news (GMT+3):
- 12:30 UK: claimant count change (Feb), public sector net borrowing (Feb), ILO unemployment rate (Jan), average earnings (Jan).
- 14:00 UK: CBI industrial trend survey – orders (Mar).
- 15:30 USA: current account (Q4).
- 17:00 Switzerland: SNB quarterly bulletin.
- 17:00 USA: existing home sales (Feb).
- 17:30 USA: EIA crude oil stocks change (16 Mar).
- 21:00 USA: FOMC interest rate decision, economic projections, and monetary policy statement.
- 21:30 USA: FOMC press conference.
- 23:00 New Zealand: RBNZ interest rate decision and rate statement.
Fig 1. EURUSD hourly chart. Source: TradingView
I was expecting the euro to drop against the dollar to the LB line (SMA 55). I had no doubt that this would happen, but what I wasn’t expecting was for the gains made on the 19th of March to be erased completely. Weak German and European data along with everyone adjusting their positions ahead of the FOMC decision has left its mark.
The euro’s decline stopped at around the 90th degree. In Asia, the euro is trading at 1.2265 (+0.18%). What we’re seeing here is a correction of yesterday’s drop from 1.2364 to 1.2240. I’m not making any predictions today because of the FOMC meeting. Markets have already factored in a 25-base-point increase to the key rate, so most interesting for us will be the Fed’s revised economic projections as well as Chair Jerome Powell’s press conference.
Traders will be listening out for hints as to how many rate hikes can be expected this year. As this is Powell’s first press conference as chair, we can expect volatility to be high this evening. One thing missing in terms of technical analysis is a downwards wave to 1.2250.