EUR/USD Right in the Middle of the Narrowing Channel

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Euro/dollar continues to its limited range trading and is now positioned in the middle of the narrowing channel (see graph).

Weak US figures and worries about Europe haven’t moved it so far. Will Bernanke spark a stronger move?

At 1.3185, EUR/USD is in the middle between downtrend resistance, now at around 1.33, and uptrend support, currently at 1.3050. The lines were formed in February.

EUR USD in the Middle of Channel Before FOMC

EUR USD in the Middle of Channel - Click image to enlarge

Uptrend support is well formed, despite a short lived break last week. The lines meet in the middle of June, and a break will probably be seen much earlier.

The pair is now trading between the 1.3165 and 1.3212 lines, which aren’t that strong. All in all, the pair is stuck in a range for a long time. Weak durable goods orders in the US and fears about the European fiscal compact haven’t really moved the pair.

At 16:30 GMT, the US FOMC will release its statement, which isn’t expected to show any change of policy, only a slightly softer tone on the economy, yet a surprise could be seen also here.

At 18:00, the forecasts of the members regarding interest rates will be released, and the grand finale will be with Ben Bernanke’s press conference, starting at 18:15 GMT.

Many participants expect Bernanke to slip a hint about QE3 in June – a move that will shake the certainly weaken the dollar. Yet with relatively solid inflation and growth still present, the chances are low. Without QE3, the dollar will strengthen.

For more details, see the FOMC preview.

Will the pair break out of range?

Update: The FOMC Statement doesn’t contain many changes, and certainly no QE3. So far, EUR/USD remains in range.

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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.