EUR/USD March 19 – Edges Lower on Fed Expectations

EUR/USD is steady on Wednesday, in what has been an uneventful week for the pair up to now, despite the continuing crisis in the Ukraine. In economic news, the markets await the Federal Reserve’s policy statement, with another trim to QE widely expected. In the Eurozone, today’s sole release is the German 10-year bond auction.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• EUR/USD edged lower in the Asian session, closing at 1.3915. The pair is unchanged in the European trading.

Current range: 1.3894 to 1.3940.

Further levels in both directions:  

• Below: 1.3894, 1.3830, 1.3773, 1.37, 1.3650 and 1.3560.
• Above: 1.3940, 1.40, 1.4149 and 1.4307.
• 1.3940 is the next resistance line. The key line of 1.40 is next.
• 1.3894 is providing weak support. 1.3830 follows.

EUR/USD Fundamentals

• Tentative – German 10-year Bond Auction.
• 12:30 US Current Account. Exp. -88B.
• 14:30 US Crude Oil Inventories. Exp. 2.4M.
• 18:00 US FOMC Economic Projections. 
• 18:00 US FOMC Statement. 
• 18:00 US Federal Funds Rate.
• 18:30 US FOMC Press Conference. 

*All times are GMT

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• QE taper likely: The Federal Reserve concludes its policy meeting on Wednesday, its first meeting under the tutelage of Janet Yellen. Recent US numbers haven’t dazzled, but they should be strong enough for the Federal Reserve to go ahead with another taper of QE. This would be the third trim of the Fed’s asset-buying scheme, and would reduce QE to $55 billion per month. These tapers are dollar-positive and mark a vote of confidence in the US economy by the Fed.
• Ukraine crisis escalates: Events are moving fast in the Ukrainian crisis. Voters in Crimea voted overwhelmingly to join Russia in a referendum on Sunday. The next day, Russian Prime Minister Putin formally recognized Crimea as an independent state, paving the way for annexation. The EU and US have slapped targeted sanctions against high-ranking Russian officials, and Western leaders plan to meet during the week to discuss a united strategy to respond to the crisis.
• ESM confirmed by German Court: The European Stability Mechanism, which is the Eurozone’s bailout fund, was confirmed as legal by the German Federal Constitutional Court on Tuesday. Germany is the biggest contributor to the EUR 970 billion fund. In February, the court deferred a decision on the Outright Monetary Transactions, which is credited with saving weak members of the Eurozone, to the European Court of Justice.
• Draghi giveth, Draghi taketh away: ECB president gave the euro a big boost by not making any move in the rate decision. However, when the pair got close to 1.40, he already opened his mouth and released a thinly veiled hint about the exchange rate. This was the main reason for the euro crash.
• Chinese worries: The negative trade balance, a corporate default and weaker than expected figures create fears that China is slowing down faster than expected and that this hard landing will impact the entire world. Meanwhile, China is also thought to be more actively diversifying away from US dollars and hoarding euros, pushing up the value of the common currency.

 

Get the 5 most predictable currency pairs