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Latest stubborn U.S. inflation reading will bring about more 'wait and see' from the Fed

EUR/USD Mid-Session Technical Analysis for September 20, 2017

James Hyerczyk
Updated

The EUR/USD is trading higher shortly before the U.S. opening. Trading is surprisingly strong ahead of today’s Fed pronouncements. This may be because the European Central Bank is widely expected to say next month that it will begin scaling back its asset-purchase stimulus program from January, even though a stronger Euro, which dampens inflation, has complicated the outlook.

If the Fed continues to move closer to raising rates, that should strengthen the dollar a little against the Euro which would support the ECB’s case for exiting it stimulus program.

On Wednesday, the Federal Open Market Committee is widely expected to leave interest rates unchanged. It is also expected to announce it will start reducing its balance sheet next month. However, traders will be glued to the press conference by Federal Reserve Chair Janet Yellen. They will be listening for clues as to the timing of the next interest rate hike.

If Yellen hints that the Fed is still on track for a December rate hike then this could weaken the EUR/USD over the near-term. However, this move may only last until next month when the European Central Bank announces its own plans to scale back its asset-purchase program.

EURUSD
Daily EURUSD

Daily Technical Analysis

The main trend is up according to the daily swing chart. Momentum is also trending higher. A trade through 1.2092 will signal a resumption of the uptrend. The main trend will turn down on a trade through 1.1837.

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The main support area is the retracement zone at 1.1877 to 1.1826. The last main bottom at 1.1837 is inside this zone, following closely by the next main bottom at 1.1823.

The short-term range is 1.2092 to 1.1837. The market is currently trading on the strong side of its retracement zone at 1.1995 to 1.1965, making it support. Holding above this zone also means upside momentum is building.

Daily Forecast

Based on the current price at 1.2008 and the earlier price action, the direction of the EUR/USD the rest of the session is likely to be determined by the downtrending angle at 1.2012 and the Fibonacci level at 1.1995.

A sustained move over 1.2012 will indicate the presence of buyers. If this move generates enough upside momentum, we could see a rally into the next downtrending angle at 1.2052. This is the last potential resistance angle before the 1.2092 main top.

A sustained move under 1.1995 will signal the presence of sellers. This could trigger an acceleration into the 50% level at 1.1965. The market opens up further under this level with the next likely target angle coming in at 1.1917.

Look for the upside bias to continue on a sustained move over 1.2012 and for sellers to hit the market on a sustained move under 1.1995.

This article was originally posted on FX Empire

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