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Euro-dollar exchange rate: which direction with Fed and ECB?

The intraday and real-time data on the EUR/USD Chart are taken from OTC product quotes.

In what direction will the euro-dollar exchange rate go in the light of the forthcoming meetings of the Fed and the ECB?

This is a very popular question, especially due to the recent rise of the couple above the threshold of 1.18.

The recently inaugurated week has already been defined by Bank of America as the most important of the entire 2018 and this is also due to the Fed meeting that will end on June 13. The euro-dollar exchange rate, however, will also be put to the test by the ECB of Mario Draghi, ready to provide new indications on Quantitative Easing on Thursday.

The expertsâ forecasts have already started to run out. Between those who have spoken of a consolidation and those who instead seem ready to observe EURUSD above 1.19, the question that the market has asked itself is always the same: in what direction will the euro-dollar exchange rate move with the meetings of the Fed and the ECB?

EURUSD Forecast: Consolidation Phase?
Despite the modest pull-back at the end of last week, the euro-dollar exchange rate managed to catch up and returned to above 1.18 when investors turned their attention to the Federal Reserve and the European Central Bank.

Both institutions will raise the veil over the latest monetary policy decisions, which will play a fundamental role in determining the pair’s next fluctuations. The Fed, for example, is expected to raise interest rates (and not only), while the ECB will provide new indications on the future of the QE.

On a day like today’s, when there is no major macro data, the euro-dollar exchange rate traded without any significant performance and fluctuated again, first above and then again below the 1.18 threshold.

All this has led many observers to speak of a brief phase of consolidation of the pair that will precede the two important events of monetary policy. In other words, investors will wait for Fed and ECB guidance before repositioning on EURUSD, just as they do on any major occasion.

Among the most recent forecasts on the euro-dollar exchange rate, however, are those of the UOB Group, whose strategists have once again focused on the possibility of observing the pair above 1.19, all regardless of the weakness highlighted during the past weekend.

Will the euro-dollar exchange rate be more affected by the Fed or ECB?
Experts predict that both central banks will adopt a fairly hawkish attitude at their meetings and press conferences. The Fed will raise the cost of money exactly as already announced, but the ECB could have an even more disruptive impact on the couple, communicating its next moves on the front of the QE and perhaps reviewing expectations.

“In this context, we assume that markets will not be enthusiastic about shoring the euro on the eve of the ECB meeting. A EUR/USD over the resistance at 1.1830/40 could support the further gains of the single currency in view of the two meetings”.

Have stated by KBC Bank.

Forecasts aside, all eyes of the market will now be on the Fed and the ECB. With the first, the appointment will be for Wednesday at 20:00, while with the second you will connect the next day, Thursday, June 14 from 13:45 onwards. Only in the second part of the week, in short, will we be able to understand the direction taken by the euro-dollar exchange rate.

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The meeting of the European Central Bank has completely changed the cards on the table as far as the exchange between euro and US dollar is concerned, with the single currency that, in order to attempt a recovery, has many more obstacles ahead of it. In addition to this, there is to consider the important relative strength of the U.S. dollar that so far has experienced a few breaks.

Trend in spot exchange rates Eur/Usd on a daily basis; source: Bloomberg

Graphically, it can be seen that the Eur/Usd courses found an important resistance at 1.1823 and that any attempt at a rise was rejected by this level. In addition, it is important to note that the extension of the bearish spark plugs is always greater than the bullish ones, signalling that the strength of the buyers is not present at the moment. The daily candle of Thursday, 14 June, the day of the ECB meeting, now forms the most important levels of price resistance, which only if they were able to recover 1.1850, a level far removed from current quotations, would completely change the scenario in favor of the euro.

In this context, with a euro that seems to lose more and more strength after the words implicitly still accommodating Mario Draghi, the closest supportive level is located at 1.15. A retest of this level would increase the validity of a double minimum graphically constructed with the previous minimum of 29 May 2018.

Operational strategies on Eur/Usd, how to take advantage of double minimums on 1.15
From the operative point of view, the indications given by this technical figure of inversion could be exploited. You could therefore stay at the window and wait for a bounce at least in area 1.168 to enter short. The target for this business could be set at $1,1370, which could put a brake on the fall in prices in the medium term.

 

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