After seeing a strong downward move during the NFP week, EUR/USD looks like it’s ready for a pause.
The pair is currently on a tight 75-pip range, with EUR/USD’s current price just bouncing off the 1.2950 area. One look at the chart reveals that the level has been a solid resistance zone since way back during the NFP release.
The SMAs could have also contributed to EUR/USD’s ranging environment. The 50 and 100 SMAs (green and blue) are right around the middle of the range, while the 200 SMA (light blue) lines up with the latest resistance.
Another possible reason for the tight range is that traders are not committing to any positions ahead of this week’s FOMC decision. Due on Wednesday at 6:00 pm GMT, the FOMC statement is expected to contain hints of early tightening from the Fed.
If Janet Yellen is not clear enough for the traders or brushes off the recent string of good news from the US, then we might see an upside breakout in the range with a possible reversal all the way to the 1.3150 level.
On the other hand, if the Fed drops the “considerable time” part of its tightening plans, or is clear on its forward guidance, then we might see another dollar rally that could drag EUR/USD all the way to its 1.2875 support.
What do you think? Is EUR/USD’s range just a pause from its downtrend, or are we seeing the start of a reversal?
To contact the reporter of this story; Jonathan Millet at firstname.lastname@example.org