EURUSD Elliott wave analysis: price rallies to 1.105 ahead of FOMC

EURUSD rallied to 1.105 ahead of the FOMC meeting on Wednesday. The market expects a rate cut. Will the Fed come up with a big surprise?

September 18, 2019 | AtoZ Markets – EURUSD hit 1.1075 on Tuesday after a quick break-away from the bearish hold. However, the price has now returned below 1.1050 to continue the bull-bear battle. The bullish correction needs a real trigger to breakaway after mixed reports from the ECB last week got it lifted. The geopolitical tension is also rising but the market will focus on the outcome of today’s FOMC policy decisions.

The Fed is expected to announce a rate cut today at the end of the FOMC meeting. The Federal Reserve is expected to reduce its benchmark overnight lending rate by 0.25% with market economists putting the bet at 63.5% probability. After the ECB decisions last week, President Trump has been asking for a rate cut which might now be taken as retaliatory.

Though the market has agreed on a 25 basis point cut, there are still concerns as to what the path of the Fed’s monetary policy will look like in the last quarter of the year. The market will, therefore, react to much more to hawkish or dovish statements than the rate cuts itself. If the USD tanks, EURUSD is expected to finally break out to 1.125 and continue toward 1.14. However, if the Fed statements are more hawkish than expected, EURUSD will surrender the current gain to retest the 1.092 low.

EURUSD analysis: important price levels

Resistance Levels: A new resistance level has emerged at 1.1075 just below the 1.1111 level. Other levels for bullish targets include 1.1165, 1.125 and 1.141.

Support Levels: 1.092 remains the major support level. However, a higher support level has been formed at 1.099. If the price breaks below 1.099, further decline below 1.092 becomes more likely.

EURUSD Elliott wave analysis

From a long term perspective, a 3-wave bullish correction to 1.18-1.21 is expected. However, the bullish momentum still needs a catalyst to break away from the bearish zone. In the last update, we used the chart below to show how the bullish correction could continue.

Price rallied toward the big trendline but retreated at 1.1075. The new chart below shows that price is closer to a bullish breakout.

If a massive breakout above 1.075 and the long term trend line happens, EURUSD price will be expected to advance further to 1.125 and 1.141 bullish target levels. On the other hand, a fast dip below 1.099 will expose the currency pair more to the bears.

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