With US dollar back to back gains ahead of June 18-19 FOMC meeting, the euro send back to the pavilion. With last week’s euro move, the dollar bulls have gained the upper hand from a short-term perspective. Overnight, the single currency managed to hold the parallel support finds at 1.1200 below here, 1.1175 exists. Overall, between 1.1200-1.1175, the currency could get decent help ahead of the FOMC meeting.

One of the basic things that FX traders can do now is to expect a dovish tone from the Fed in the June meeting. We and the heavy portion of the forex traders expect a dovish policy shift at the upcoming June meeting. Along with the Fed meeting, we also focus on ECB’s annual conference takes place from 17-19 June and EU summit from 20-21 June.

  • Danske Bank said, “We expect the Federal Reserve to make a dovish policy shift, paving the way for a rate cut in July and a total of 75bp in cuts in H2 19”.
  • ING also noted the same theme in Economic and Financial Analysis report. James Knightley at ING said, “With trade tensions likely to escalate, this Wednesday’s Fed meeting looks set to confirm market expectations – precautionary interest rate cuts are coming.”

The Chief International Economist also said, “Currently, markets are anticipating around 100bp of easing over the next twelve months with the first cut around 80% priced for July. We think this may be a little too aggressive and look for two 25bp moves in September and December. However, should the Fed warn of outright downside risks to growth this week we will likely need to move this forward to July and September”.

  • Nomura said, “ The FOMC will likely be wary of making the same mistake in June that they did in December when markets reacted negatively to a meeting that was perceived to be not quite dovish enough relative to market expectations. Against this backdrop, we expect the FOMC to send a signal that they are ready to act if needed, teeing up a July rate cut”.

Data review:

In terms of last week’s EA economic releases, Industrial production down by 0.5% in the euro area according to the official release.

Data preview:

Looking ahead, we will get German ZEW Economic sentiment (Tue), EA CPI (Tue), and June PMIs (Fri). On top of these, ECB’s annual conference takes place from 17-19 June, and EU summit from 20-21 June is worth to watch closely.

TECHNICAL OVERVIEW

Overnight, the single currency managed to hold the parallel support finds at 1.1200 below here 1.1175 exists. Overall, between 1.1200-1.1175, the currency could get decent support ahead of the FOMC meeting.

Turning to daily indicators, RSI lacks conviction, and the oscillator is remaining bearish. On the downside between 1.1200-1.1175 is the pivotal for the week ahead, below here focus shifts to 1.1140 and 1.1100 levels.

On the other hand, 1.1250 and 1.1300 shall act as a key resistance level.

View: Selling may intensify further below 1.1180.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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