Hi everyone! On Wednesday, the EUR/USD pair was steadily rising ahead of the Fed meeting as the economic calendar remained empty. Hence, speculators were mainly focused on the meeting. They were not particularly interested in the size of the rake hike. They anticipated Jerome Powell's speech. Notably, the trajectory of the euro/dollar pair did not change significantly following the meeting. However, the US dollar is now climbing. As a result, the pair dropped to 1.0574, the Fibonacci correction level of 161.8% 4. Yet, the pair may resume the upward movement at any moment.
Although many investors were surprised by Powell's statements, in my opinion, he did not say anything new. He admitted that the regulator would continue raising rates albeit at a slower pace. At the next meeting in February, the Fed will make its rate decision based on inflation data. It means that if inflation decreases, the Fed could undertake a smaller rate hike. As widely expected, yesterday, the Fed hiked the interest rate by 50 basis points. Jerome Powell noted that the top priority is to restore price stability. This I why the Fed is ready to raise rates as long as necessary. Before the meeting, the pair was climbing. Following Powell's hawkish comments, it dipped but later it rose again. However, it resumed a downward movement at night. The pair is extremely volatile because investors are still digesting Powell's remarks as well as the 0.50 basis point rate hike. To some extent, the results of the Fed meeting were in line with expectations. Therefore, the trajectory of the pair did not change markedly as there were no powerful drivers that could trigger sharp price swings.
Today, the ECB will announce its rate decision. The regulator's decision will also hardly surprise traders. The key rate is projected to be raised by 0.50 basis points. Speculators factored it in a long time ago.
On the 4H chart, the pair is growing to 1.0638, the Fibonacci correction level of 100.0%. If the pair fails to reach it, it is likely to retreat to 1.0173, the Fibonacci correction level of 127.2%. If the price consolidates above 1.0638, it could jump to 1.1041. The movement in the uptrend indicates that the sentiment remains bullish. If the price drops below, the US dollar will assert strength and the bears will take the upper hand.
Commitments of Traders (COT):
Over the past week, traders opened 3,941 long positions and 1,305 short ones. The difference is rather moderate. The sentiment of large retail traders remains bullish. The total number of long positions amounts to 245,000, whereas the number of short positions comes in at 120,000. The euro is steadily growing as it is stated in the COT reports. At the same time, the number of long positions is already twice as high as the number of short ones. In the last few weeks, the euro has been constantly growing. This is why some traders wonder whether it is overbought. Nevertheless, fundamental conditions are favoring its further rise after a long period of a downtrend. The euro also broke out of the downtrend corridor on the 4-hour chart. So, the euro is likely to continue its upward movement in the long-term prospect.
Economic calendar for US and EU:
EU- ECB's key rate decision (13:15 UTC).
EU- ECB Economic Outlook (13:15 UTC).
US- Retail Sales report (13:30 UTC).
US – Initial Jobless (13:30 UTC).
EU- ECB Press Conference (13:45 UTC).
US- Industrial Production (14:15 UTC).
EU- Christine Lagarde's speech (15:15 UTC).
On December 15, the economic calendar for the European Union and the United States is quite eventful. The impact of the fundamental factors on market sentiment may be strong.
Outlook for EUR/USD and trading recommendations:
I would advise you to open short positions after a bounce from 1.0638 on the 4H chart with the entry points at 1.0430 and 1.0315. It is recommended to open long positions if the pair rebounds from 1.0574 on the 1H chart with the entry point at 1.0705.