Monetary policy uncertainty may support EURUSD

08 November 2023 151
Monetary policy uncertainty may support EURUSD


The EURUSD currency pair has been declining since the beginning of the week. It is caused by the uncertainty of the future monetary policy of the US and the EU.


After keeping interest rates unchanged at the last FOMC meeting, market participants focus on the upcoming speeches of the Federal Reserve System (Fed) speakers this week. Traders look forward to the speeches of central bank chairman Jerome Powell, FOMC deputy chairman John Williams and FOMC member Raphael Bostic. The officials are expected to comment on the regulator's further monetary policy.


Meanwhile, on Tuesday, several Fed officials expressed a cautious view on the central bank's future actions. They mentioned the necessity of monitoring economic data and the impact of bond yields.


According to the CME FedWatch tool., futures point to a roughly 15% chance of another rate hike by January. At the same time, there is a 20% chance that cuts could come as early as March 2024.


Meanwhile, the International Monetary Fund (IMF) says the European economy is unlikely to crash, even with a prolonged increase in interest rates, which tames inflation. A report published on Wednesday predicts a soft deceleration of the economy, with inflation declining gradually. Growth in gross domestic product in much of the region will slow to 1.3% in 2023, improving slightly to 1.5% in 2024.


However, the fund warns that it may take several years for consumer prices to recover to normal levels.


This report could be the starting point for a sustainable growth in the value of the euro in the long term.


The EURUSD quotes went beyond the upward corrective trend on the H4 timeframe. The wave analysis of the hourly timeframe indicates the formation of the second downward wave caused by the extension of the current trend. Approaching of the price to the strong support at the level of 1.0660 may create conditions for the reversal of the currency pair value and the formation of a new upward wave. Moving indicators Stochastic Oscillator (standard values) are approaching the oversold zone, which may also portend a change in the direction of price movement.


Signal:

The short-term outlook for EURUSD is to buy.

The target is at the level of 1.0890

Part of the profit should be fixed near the level of 1.0750

A Stop loss should be placed at the level of 1.0585

 

The bullish trend is of a short-term nature, so it is recommended to limit the trading volume to no more than 2% of your balance.

 

This content is for informational purposes only and is not intended to be investing advice.

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