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  • EUR/USD created an inside bar candlestick pattern on Tuesday, making today’s close pivotal.  
  • A close above Tuesday’s high would imply a continuation of the rally from 1.0989.  
  • The focus is on  the FOMC’s view on the risks to the outlook.
  • Markets have already priced out Fed  rate cuts all the way until June 2020.

EUR/USD’s recovery rally has likely stalled and today’s close will decide the next move, Tuesday’s daily candle indicates.

The pair’s trading range of 1.1084-1.1063 witnessed on Tuesday fell within Monday’s high and low of 1.1090 and 1.1048. Essentially, the pair created an inside bar candlestick pattern on Tuesday, indicating the bounce from the Nov. 14 low of 1.0989 has run out of steam.

A close above the inside bar’s high of 1.1084 is needed to revive the recovery rally from  1.0989. Meanwhile, a close below the inside bar’s low of 1.1063  would imply a bearish reversal.

The US 10-year treasury yield has dropped to a two-week low of 1.763% and has shed over 20 basis points since topping out at 1.972% on Nov. 7. Further, the US-China political tensions are weighing over risky assets. Therefore, a bullish close looks likely.

That said, the tide will likely turn  in favor of the bears if the minutes of the FOMC’s 29-30 October meeting, due at 19:00 GMT, sound hawkish.

The hawkish tone, however, needs to be strong, as the financial markets have written off interest rate cuts by the Fed all the way until June of 2020, as pointed out by popular analyst Mike “Mish” Shedlock.

Westpac Institutional Bank’s FX Daily note says:

The major change at the October meeting was the move to a more reactionary stance – the FOMC will now “assess the appropriate path” whereas previously would “act as appropriate”. Given Chair Powell sees the US economy in “a good place”, of key interest in the minutes will be the FOMC’s view on the risks to the outlook.

Technical levels