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Asset Watch
Tuesday, September 17, 2024
With the most anticipated event of the September season only hours away, this week’s FOMC meeting could have an outsized impact on asset prices. Traders are still debating whether the committee should opt for a 25 or 50-basis point rate cut, so uncertainty remains high.
And as the U.S. dollar looks likely to incur the largest move following the release, could its global counterparts gain the upper hand in the days ahead?
While various Fed speakers made headlines last week, their conflicting tones have everyone guessing. However, Citigroup told clients on Sep. 13 that “The decision might come down to [this] week’s retail sales reading. While soft auto sales mean that headline retail sales will be down, the control group will be up (+0.2%) according to our forecast.”
The U.S. retail sales data is released on Sep. 17, one day before the FOMC decision. As a result, the USD could move significantly as the rumours swirl.
The EUR/USD is the world’s most popular currency pair and the most heavily traded. The horizontal white lines highlight how the battle between 1.10 and 1.11 has been in place for a few weeks.
Though investors have been unwilling to push the pair meaningfully above 1.11, that could change in short order.
Aiding the EUR/USD are the upward-sloping 5 and 10-week moving averages, which are depicted by the blue and yellow lines. The currency pair has not closed below the 10-week MA since June 2024, and higher highs and higher lows have occurred since October 2023.
Consequently, the euro deserves the benefit of the doubt until the weekly uptrend reverses.
There is typically a ton of volatility during Fed Chairman Jerome Powell’s press conference, and afterwards, traders can reverse the entire bullish or bearish move. Therefore, you should pay close attention to the 10-week MA. If a pullback and bounce unfolds, it could be a sign the EUR/USD has found a reliable floor.
But if the FOMC cuts by 50 basis points and the FX pair soars, flipping 1.11 from resistance to support may be a clue that the EUR/USD’s bull market is just getting started.
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