EUR/USD at Strong Resistance Before the FOMC – Short

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EUR/USD is close to the weekly highs just before the FOMC meeting. Expectations are high for more monetary stimulus. 

However, there are many reasons to believe that the Federal Reserve will not announce any new policy this time. With the pair close to resistance, this could be a short opportunity.

Update: Indeed a short opportunity, as the Fed does NOT announce QE3 and EUR/USD plunges.

EUR USD Resistance before FOMC June 20 2012

EUR USD Resistance before FOMC – Click image to enlarge

Why will the Fed avoid easing? In short: inflation isn’t low, housing is showing signs of recovery (including the most reason signs) and the economy is still growing according to PMIs.

And most importantly, if we take it from Bernanke, he said that QE has “diminishing returns” – long term yields are already very low – more bond buying will not push them much lower. See more in the FOMC Preview.

EUR/USD is at 1.2718 at the time of writing. The post-Greek-elections high was 1.2748. This is also the highest level in nearly one month. In case Bernanke indeed disappoints, it will be a bounce from resistance – a rather sharp bounce.

If Bernanke does deliver, we could see a breakout to higher ground. But, as it is priced in, breaking resistance will be quite tough.

See more levels in the EUR/USD forecast.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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