The Fed Monetary Policy Intraday Strategy: Targeting Euro Dollar

EURUSD Intraday Strategy

The center of attention for EURUSD traders was on the European Central Bank (ECB) monetary policy meeting. Mario Draghi, the President of the ECB announced inflation forecasts were lowered for 2018, however, it does not suggest an imminent tapering is due.

There are some that suggest the ECB may begin downsizing its QE in September, however, we believe the central bank will monitor the developments of the brexit negotiations that re sent to begin on 19 June, 2017. The current expectations are for the ECB to begin altering its monetary policy in December, 2017.

Comey’s (former FBI director) did not trigger significant volatility in USD pairs and crosses in the Foreign Exchange (Forex) market despite some expectations for a more aggressive reaction. There has been some progress in the upcoming US tax cuts plan but the focus will be on the Fed monetary policy, due on Wednesday. Our EURUSD intraday strategy is based on the 4hr chart.

EURUSD 4hr Chart

Please click on the chart to enlarge:

The Fed Monetary Policy Intraday Strategy: Targeting Euro Dollar

EURUSD 4hr Chart 10/06/17

Euro Dollar Technical  Strategy

At first glance it may appear EURUSD reached a fairly strong support level after reaching 1.1280, which was our target following the breakout in our prior EURUSD intraday strategy. Euro Dollar was unable to firmly break above the resistance, which lead to the current weakness.

Despite the firm support EUEUSD uptrend is questionable. We do see the possibility of breaking above 1.1280, which may mark the third wave, however the break below 1.1225 dampen significant recovery efforts that may be made by the market.

In terms of the intraday strategy, EURUSD may re-test 1.1225 after meeting a firm support level, however, from a technical angle a better approach may be to seek short entries. A re-test of 1.1225 may be sufficient to create decent conditions for sell-on-dips strategies. Upon such a re-test we suspect may tight stops will be layered in the market, 1.1248 is the latter resistance which is expected to hold at first test.

We are aware the EURUSD may rebound off the current support to 1.1285, we highlight that the bearish outlook has the upper hand at the time of this writing. Once the support (in blue) gives way EURUSD selling is expected to resume, target 1.1078. Only a firm break above 1.1285 may trigger stronger gains in the currency pair.

Fed Monetary Policy Forecast

Just as we have seen in the last rate hike, the Fed is widely expected to hike rates in June with the possibility of another hike in 2017. The third hike will greatly depends on US fiscal plan and the brexit negotiations. If the Fed does not hike it will be a great surprise.

The focus will therefore be on the accompanying statement. The market would like to see whether the Fed hints a third rate hike is still on the table as well as the economic projections. Based on our intraday strategy for Euro Dollar there is a firmer case for a firm USD following the Fed monetary policy. Janet Yellen press conference is also important but it will be after the statement has been released.

We should stress that EURUSD trend, bullish or bearish may also take place prior to the Fed monetary policy. Only in the event EURUSD re-tested 1.1225 prior to the Wednesday and has retraced lower it strengthens the possibility further pressure may be seen as a result of the Fed.

We will issue an update on Wednesday regardless of the progress our intraday strategy.

16/06/17 UPDATE: EURUSD ripped through 1.1248 and brought to a halt at 1.1285.

Please click on the chart to enlarge:

The Fed Monetary Policy Intraday Strategy: Targeting Euro Dollar

EURUSD 4hr Chart 16/06/17

Although the intraday strategy may still be relevant as the price is testing the upper resistance (top blue line) we are granting access to all traders to review the strategy.

Last Updated on June 16, 2017