It’s Fed Week: Will We Get Any Hints About the Rate Cut?
EUR/USD Breaks 1.1500. Is 1.1700 Next?
The US Dollar advanced against its major counterparts on Friday after Israel bombed Iran’s nuclear facilities but overall the week was bearish. The USD is currently trading at 1.1540 against the Euro and erased some of the losses incurred earlier in the week. However, the dollar’s gains were small compared to the euro’s, which managed to break the key resistance at 1.1500.
The Middle East conflict triggered demand for safe-haven assets such as USD and gold, at the same time sending oil higher. President Trump urged Iran to reach an agreement regarding the nuclear program and suggested that the Iranians brought the attack on themselves by defying a U.S. demand to limit its uranium enrichment activities.
The trade tariffs are still a red-hot issue, despite the recent violence in the Middle East and the partial deal reached between the U.S. and China.
Economic Calendar Highlights
The first event of the week will be the release of the U.S. Retail Sales, scheduled for Tuesday at 12:30 pm GMT. Sales made at a retail level represent the biggest part of consumer spending, which in turn represents the major part of overall economic activity.
The FOMC will announce the interest rate on Wednesday at 6:00 pm. While the rate is expected to remain unchanged at 4.50%, it will be interesting to see what the FOMC statement contains and if there are any clues regarding the next move. President Trump has been pressuring the Fed to lower the rates and the last CPI reading was lower than expected. It remains to be seen if these factors affect the Fed’s stance. Fed Chair Powell will hold the usual press conference at 6:30 pm GMT.
The Bank of England will announce the interest rate on Wednesday at 11:00 am GMT but there is no change expected from the current 4.25%. Unless surprises happen, the event will not have a serious impact on the British pound.
Technical Outlook – EUR/USD
The pair broke through the resistance at 1.1500 with a strong daily candle and healthy volume, albeit the volume was lower than it was on the first test of the mentioned resistance. On Friday, the dollar erased some of the losses, buoyed by increased demand for safer assets but the move down is small compared to the strong rally.
Volatility may be muted during the first couple of days of the week but it may increase on Wednesday at the time of the Fed press conference. Although the rate will likely stay the same, Chair Powell may hint about the timing of the next rate cut and if this happens, the dollar will surely respond.
A daily close below 1.1500 will shift the balance in favor of the US Dollar bulls and a break of the trend line seen on the chart below will add more fuel to the descent.
