The market is preparing for potentially significant moves later today as we await the latest interest rate update from the FOMC. FX traders are closely watching the Euro for opportunities to capitalize on any surprise updates from the Fed, as it could provide a cleaner trade compared to other major currencies that also have central bank rate decisions in the coming days.
The FOMC is widely expected to cut interest rates by 25 basis points. Anything other than that result will likely trigger substantial market moves. However, most anticipate that any volatility will stem from changes in the dot plot and/or forward guidance from Jerome Powell and the rest of the committee.
The Euro has been trading in relatively tight ranges over the past week, and traders are hoping today’s Fed update will push the single currency into new ranges. The pair has dropped nearly 8% from peak to trough since its high in September, and traders are now looking for a less dovish update from the Fed for this trend to continue. If we do receive a less dovish message, the recent annual low at 1.0333 could come under pressure. Conversely, if the committee signals more rate cuts than expected heading into 2025, we could see a strong rally back into higher ranges, with the monthly high and trendline resistance on the hourly chart likely to provide strong initial resistance.
Key Levels:
Resistance 2: 1.0629 – December High and Trendline Resistance
Resistance 1: 1.0521 – 200-Day Moving Average
Support 1: 1.0362 – Trendline Support
Support 2: 1.0333 – 2024 Low
