The EURUSD currency pair has recently managed to rebound slightly from the 1.046 level, where the lows of December were set. Ahead of today’s Fed meeting traders are not inclined to drastically change their positioning, but once the US regulator makes its decision the currency market is sure to get into motion. The euro-dollar ratio still has a small growth potential, but it is more advisable to use it for selling. It is highly likely that the EURUSD quotes will soon return to the 1.046 level.
A key rate cut in the US, which will take place today with a chance of almost 95%, is not likely to weaken the national currency. This opinion was expressed by Reuters analysts, with reference to the latest economic statistics. In particular, yesterday’s retail sales data for November showed a 0.7% increase, which exceeded traders’ expectations. At the same time, the late Thanksgiving postponed almost the entire selling season to December, and the result of the current month may be even stronger.
Christopher Rupkey, chief economist at FWDBONDS, is looking forward to detailed comments from Jerome Powell and his colleagues on the state of the US economy. The latest statistics indicate consistently strong performance, with no urgent need for monetary policy easing. In addition, Donald Trump will soon officially take office as US president putting additional risks of accelerated price growth. According to Rupkey, in such a situation, the Fed should not add oil to the fire, but instead stop the cycle of interest rate cuts.
Meanwhile, the European economy is still in a state close to stagnation. Reuters experts focus on the labor market, where demand is actively cooling. Wage growth in the European Union slowed from 5.2% to 4.6% over the past quarter, while the vacancy rate fell to a two-year low of 2.5%. The situation in the labor market is forcing the European Central Bank to further ease monetary policy, putting pressure on the EURUSD quotes.
The midpoint of the 1.046–1.06 range looks rather interesting for opening short positions on EURUSD. The bears will be preparing for a new test of the 1.046 level.
Consider the following trading strategy:
Sell EURUSD in the range of 1.05–1.055. Take profit – 1.046. Stop loss – 1.06.
