FOMC meeting brings dollar focus for EUR/USD, GBP/USD and USD/JPY
Dollar comes into focus as the FOMC meeting brings expected volatility. While we have seen some gains for the greenback, another dollar decline looks likely across EUR/USD, GBP/USD and USD/JPY.
EUR/USD turns higher from Fibonacci support
EUR/USD has ticked lower in the early part of the week, with the pair falling back into a ten-day low yesterday. Crucially that pullback took us into the 76.4% Fibonacci support level at $1.0804.
The wider uptrend evident over the course of the past four-months does bring the expectations that each pullback will reintroduce bullish momentum after the steam has been taken out of the market. This appears to have happened once again, with the bullish trend remaining in play unless we see the price fall back below the $1.0766 support structure to bring about a fresh low and wider reversal.
Watch out for volatility today, with eurozone purchasing managers index (PMI) and inflation data precluding a crucial Federal Open Market Committee (FOMC) meeting this evening. As for EUR/USD, the respect of Fibonacci support and prevalent uptrend brings expectations of further upside, with a move through the $1.0766 level required to negate that view.
GBP/USD weakens from key resistance
GBP/USD has been on the back foot since engaging with the crucial historical resistance level of $1.2446.
Coming off the back of a period of gains that brought the pair an impressive 20% higher over the past four-months, there is an underlying trend that signals the potential for further upside despite current struggles. That outlook could change if we start to see key levels such as $1.1841 taken out.
However, for now it is worthwhile watching the $1.2263 support level, with a break below that point bringing a double top formation and signalling the potential for a period of downside to retrace part of the wider $1.1841-$1.2446 leg. As such, near-term sentiment will be dictated by the ability to break through either $1.2263 (bearish) or $1.2446 (bullish).
USD/JPY consolidates pre-FOMC
USD/JPY has been consolidating over the course of the past week, with the pair treading water after a period that brought the price back up towards the upper boundary of a descending channel formation. That channel continues to highlight the dominant bearish trend, with the tightening inflation gap between the US and Japan lessening the case for the huge USD/JPY gains seen last year.
Today’s FOMC meeting will be key, with USD/JPY bears hoping to see Jerome Powell signal that the tightening phase is largely over, and inflation pressures are expected to ease further. From a technical perspective, there is an expectation that we will see further weakness from here.
As such, short positions are favoured, with a rise through $134.77 required to negate that bearish outlook.
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