Daily Market Recap – EURUSD Euro consolidates as we await Fed

The EURUSD continues to consolidate as it awaits the outcome of the FOMC monetary policy meeting on Wednesday night. The euro was up 0.15 percent against the dollar near market close on Tuesday.

Central bank officials are meeting this Tuesday and Wednesday to discuss the central bank's monetary policy. While no changes are expected, some observers expect the FOMC to announce a future reduction in the pace of asset purchases.

Indeed, given the very strong demand for housing, some observers believe that the Fed could start by reducing its asset purchases by reducing its purchases of mortgage-backed securities (MBS), of which the Fed buys about $40 billion each month.

Others believe that the FOMC will not announce anything until after the fall, while more Americans get their shots and the risk generated by the Delta variant diminishes.

In addition to the Fed's monetary policy, market participants will also be watching for the advance estimate of U.S. GDP for the second quarter on Thursday and then the PCE inflation index on Friday.

In the meantime, it is the rates of the American government bonds which played against the green bill, according to Kathy Lien, of BK Asset Management.

After having approached 1.30% a few hours earlier, the rate of 10-year bonds was resolutely close to 1.20%, at 1.23%, a brutal movement for this market. “This shows the uncertainty” surrounding the Fed meeting, explained Kathy Lien.

In terms of technical analysis, the EURUSD has been consolidating in a range between $1.1845 and $1.1752 for roughly ten days. A breakout from this range will indicate the next move for the EURUSD.

A breakout from the top would mean that the EURUSD has bounced off its long-term bullish oblique through the lows of last November and March (black on the chart) and has broken out from the top of its descending wedge, which would be signal for a bullish reversal.

(Chart Source: Tradingview 27.07.2021)

Conversely, a breakout from the bottom of the range would open the way for a continuation of the downtrend. The March low of $1.1710 would be the next support to watch.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.