Expect Market Volatility All Week

Euro and US dollar Talking Points:

  • EURUSD short-term direction is difficult to predict.
  • Volatile market drivers need careful monitoring.

The DailyFX Q3 EUR and USD Forecasts are available to download.

EURUSD – FOMC, Data, Trade Tariffs and Italy – A Very Bumpy Road Ahead

As we come into the month- and quarter-end the market backdrop for both the Euro and the US dollar throws up a wide range of market moving data and events with each one capable of throwing up a volatile market move.

US-China trade relations continue to erode after the latest round of US trade tariffs came into force Monday on USD200 billion of Chinese goods with China set to retaliate by imposing tariffs on USD60 billion of US imports. This in turn will spark an additional USD267 billion of US tariffs on Chinese goods. US-China trade talks have been cancelled for the foreseeable future, leaving the market vulnerable to further trade rhetoric from both sides.

A Brief History of Trade Wars

On the economic calendar there is a raft of high importance releases, all capable of initiating a market move, while on Wednesday the FOMC is fully expected to raise interest rates by 0.25% for the third time this year. Federal Reserve chair Jerome Powell will hold a press conference after the decision and his updated views on the US economy, and the latest Dot Plot will shape the US dollar for the weeks ahead.

DailyFX Economic Calendar w/c September 24

And on the left-hand side of EURUSD, the euro will be watching the Italian Budget projections on Thursday before they are submitted to the European Union later in October. The ruling League and Five Star want to increase the budget deficit to pay for their election promises which includes a guaranteed EUR780 monthly income for all unemployed Italians. However, Italy’s technocratic finance minister is pledging to keep the country’s budget deficit at or around 1.6% leaving little room for the ruling government’s spending pledges to be put in place.

EURSUD Breaking Higher on the Chart

After touching a three-month high last Friday, EURUSD sold off back into a cluster of old highs. The pair have made a positive start to the week, trading +0.20% higher at 1.17650 and may re-test the 1.18030 high. Above here resistance comes into play at 1.1850 followed by the May 14 high at 1.19963. support is provided by the 20- and 50-day moving averages at 1.17334 and 1.16913 respectively.

EURUSD Four Hour Price Chart (August 2 – September 24, 2018)

EURUSD Price Analysis: Expect Market Volatility All Week

IG Client Sentiment Datashow that retail investors are 34.3% net-long EURUSD and coupled with recent changes gives us a strong bullish contrarian trading bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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