Technical Analysis

EURUSD trades near 6 month high going into rate decisions

EURUSD trades near 6 month highs going into rate decisions

The EURUSD is trading near 6 month highs heading into the FOMC rate decision at 2 PM ET. The Fed is expected to raise rates by 50 basis points, lowering the pace of rate hikes from 75 basis points over the last four meetings. The terminal rate will be of interest by market participants with the pricing near 4.83%, down from 4.99% before the CPI data yesterday. The dot plot from the September meeting showed the Fed expecting a terminal rate near 4.6%.

Tomorrow, the ECB is expected to raise rates by 50 basis points when they announce their decision at 8:15 AM ET.

Technically, looking at the daily chart of the EURUSD, the price for the pair moved above and below the 50% midpoint of the 2022 trading range (at 1.05155) over the first eight days of the December.

Yesterday, the low price stayed above the 50% retracement level. The low price yesterday was at 1.05274. The CPI data sent the price to a new high going back to June 9. The high price reach 1.06727.

Looking at the daily chart, that move to the upside saw the price extend above the swing high from early December at 1.05943 and then above a swing area high going back to April, May and June at 1.06402.

In trading today, the low price re-entered into the swing area between 1.0594 and 1.06402, bottoming at 1.0618 that was just above the last swing high from June 27 at 1.0615 before the rotation to the September low. Buyers remained more in control by holding against that area.

What now?

Through the FOMC rate decision, the area between 1.0594 and 1.0640 will be a neutral territory. Trade between it and the buyers and sellers are battling. Move below the 1.05943 level, however, and I would expect buyers to be disappointed on the break higher, and look to move back toward the 50% midpoint at 1.05155 over time.

Conversely if the price is able to stay above the aforementioned swing area, the next upside target comes against the 61.8% retracement of the years trading range at 1.07468. Above that swing levels from March through June between 1.0773 and 1.0805 would be the next targets to get to and through.

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