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EUR/USD – Mid-Term Outlook

September 14, 2012 in Forex Fundamentals and News

Mid-Term Outlook of EUR/USD

Federal Reserve announced buying of Mortgage Securities in yesterday’s policy meeting. This 3rd round of bonds buying is another effort for the quantitative easing to help the job market and hence the economy of U.S.

Though yesterday’s report of “Continuing jobless claims” was better than expected but the Initial Jobless Claims” increased and showed the figure as 380,000 against the previous month’s 367,000.

The monthly budget statement also was bearish with -191 B U.S. Dollars against the last month’s USD -69.6B.

Let’s have a look on some of the fundamental and technical factors to see what is to be expected from EUR/USD in the coming days:

Fundamental/Market Sentiments:

1) ECB’s plans of unlimited bond buying to help debt crisis and German court’s ruling for conditional German stand for the same has boosted up the confidence in Euro at least temporarily. There are still some uncertainties about Greece not reaching agreement for budget/spending cuts to be eligible to receive the rescue funds.

2) The 3rd round of Quantitative Easing measures announced by Fed should keep some bearish pressure on USD. There is generally an inverse relationship in Bonds and interest rates and hence the currency itself.

Technical and Price Action:

1) First time after May 8th the price touched the 1.3000 level. Though it is hesitating to break it decisively after touching 1.3001 but the momentum is expected to take it further up, at least in psychological terms. Not only that but the break of the mid-term channel resistance indicate that further upward move should take place. Please check the weekly EUR/USD chart as follows:

EURUSD break of trend line resistance

2) Technical Indicators:

Weekly Ichimoku Cloud:

Weekly Ichimoku has not yet given a bullish crossover signal but such a strong break of Kijun line resistance after long suggests that the currency pair should try to test the next resistance of the lower edge of the cloud i.e. move towards 1.3140 next.

EUR/USD weekly chart - Ichimoku cloud

Weekly MACD:

Weekly MACD has crossed over the signal line to give a bullish signal.

EUR/USD MACD - Weekly chart

Overall, considering all factors we would expect EUR/USD to have further upward moves towards 1.3140 first and then may be more. While saying this we also expect some sideways moves near/below 1.3000 initially, considering the psychological aspects of this level.

EUR/USD Outlook – September 13, 2012

September 13, 2012 in Forex Analysis

EUR/USD has been moving in very narrow ranges even though the movement is showing signs of bullishness.

The factors which are keeping the move in check are:

1) Psychological resistance of approaching 1.3000 ranges:

Since May 8th, 2012 the pair has been trading below this and even had dropped as low as 1.2042.

2) Questions about the rescue plans in Euro zone:

On one hand the German court ruling was supportive for the rescue plan after the ECB announcement of the readiness for unlimited bond purchase but on other hand the the lack of agreement of spending cuts in Greece are keeping the uncertainties high. This agreement is required to be able to receive the aid.

3) Policy meeting of Federal Reserve:

Speculations that Federal Reserve will announce plan for bond buying in today’s policy meeting. The meeting is scheduled at 18:15 GMT today.

The key support at first 1.2900 and then 1.2860 may prove to be critical and on the other side the resistance of the recent 1.2936 needs to be broken to expect a test of 1.3000. A test of this psychological level should ultimately take place after such a strong upward move but still a close watch for the supports and careful approach is required.