Technical analysis for EURUSD pair before the FED rate hike decision
The medium-term uptrend in the EURUSD pair is still intact in the daily chart. Currently, the price is trading near the 38.2% Fibonacci retracement level where the pair might find some for another upward rally. Previously the pair has found some solid support near the 1.12000 level and traders are expecting this level to hold.
EURUSD daily chart analysisFigure: EURUSD daily chart technical analysis
The initial upward rally in the EURUSD pair starting from 1.0520 level tends to complete its upward momentum after hitting the high 1.1620 level on 2nd may 2016.From that level, the pair faced a significant amount of resistance and ultimately dropped towards the 61.8% retracement level. The 1.09398 level provided a significant amount of support to this pair and push the pair higher again. But the sharp fall has changed the medium-term bullish bias into neutral since the price has broken the medium-term uptrend line. After rejecting the 61.8% retracement level the price sharply bounces back in the upward direction and closed below the 50% daily retracement level. Gradually the pair managed to overcome its losses and climbed back towards the broken uptrend line which turned into strong résistance. Currently, the trend line resistance is situated at 1.1360 levels. This level again provided fresh sellers to the EURUSD pair which again drove the price back towards the 50% retracement level.Currently; the price is trading above the 38.2% retracement level and traders some minor bounce from this level. If the pair manages to breach the 38.2% retracement level than we can see an immediate decisive move in the price towards the 50% retracement level. Once that level fails the final obstacle for the pair would be 1.09398 levels where the 61.8% Fibonacci retracement level lines. A bearish closing below that level will bring strong downward rally in the pair. Professional long-term traders are waiting patiently for the market to break the 61.8% retracement level to initiate fresh selling orders.
EURUSD weekly chart analysisFigure: Technical analysis for the EURUSD pair, weekly chart
The pair has been trading within a very narrow range for the last couple of week. There has been a triangle shape formation in the weekly chart of the EURUSD pair. The current resistance is situated at 1.1320 level. Traders are expecting that the pair will face a significant amount of résistance near the sloping downward trend line. A bullish break above that level will threaten the key resistance level at 1.14556.On the contrary, the initial support for this pair in weekly chart is situated at 1.1000 levels. For bearish continuation, the pair needs to clear the strong support at 1.1000 level with a strong bearish breakout. A valid bearish breakout of that level will bring a quick downward fall of this pair towards the 1.0700 level. Traders are expecting some minor bounce from that level. But a decisive move to that level will ultimately initiate the huge fall of this pairs towards the low 2nd December 2015.This is the key level which the traders will keep in mind before they declare that the correction of the pair has been completed. Strong rebound might be seen from that level for a bullish momentum. But a daily closing below that level will confirm the initial upward capping off this pair towards the 1.16000 level.
The US dollar is fundamentally very weak at the current moment. From the very beginning of the year 2016, there has been a rumor of interest rate hike decision by the FED. Still, after 8 months the FED is unable to hike their interest rate considering the other economic factors. The recent economic data of the unemployment claim and average hourly income was significantly bad which has created a mass confusion into the mind of investors about the recent interest hike decision. Keeping the upcoming FOMC meeting minute in mind the volatility of the market has ceased since most investors are on the sideline due to the market indecision. On the contrary, the Euro is also suffering from heavy financial loss due to the bad data of German CPI index. To be precise the weakness of the US dollar has been mitigated to a great extent by the bad economic condition of the European zone.
There is high chance that the FED will readjust their inflation rate just before the FOMC meeting minutes, If the inflation rate is readjusted then we can see a nice probability of rate hike in this month. Without that investors are thinking that it will be a hard decision for the FED to hike their interest rate considering all the situations. As the market is suffering from indecision due to mixed economic data and the choppy movement of the price has triggered many stop loss in the market. Professional forex traders are more cautious about their investment and they are not ready to take any action until the FED gives a clear indication of their economy. But if the FED postponed their rate hike decision this month then there will be 60% probability of rate hike in the month of December.
Summary: The long-term bearish trend in the EURUSD pair is still intact. Professional traders are waiting for a suitable position to enter short in this pair. Though the pair has managed to rally upward in the last couple of month but the overall scenario for this pair is till strongly bearish. Keeping the rate hike decision in mind we will stay on the side and wait patiently until more lucrative selling opportunity present itself in the market. Trading this pair without any price action confirmation signal will be an immature act at this moment. So it’s better save our hard earned money and look for selling opportunity in the next upcoming days.