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18.12.202414:37 Forex Analysis & Reviews: EUR/USD: December 18 – The FOMC Meeting Could Guide Traders

Relevancia 04:00 2024-12-19 UTC--5
On Tuesday, the EUR/USD pair continued its horizontal trading below the 323.6% retracement level at 1.0532. A bearish sentiment persists under this level, but the market remains stagnant. A break above 1.0532 does not guarantee further growth for the euro, while a rebound from this level does not ensure a decline. The market is flat.

Exchange Rates 18.12.2024 analysis

The wave structure is straightforward. The last completed downward wave failed to break the low of the previous wave, and the latest upward wave only slightly exceeded the prior peak. This indicates the pair has initiated a bullish trend, though it appears weak and may already be ending. To invalidate the current bullish trend, the pair must drop below the 1.0461 level.

Tuesday's fundamental backdrop was relatively weak, as reflected by the lack of movement in the market. None of the reports released influenced trader sentiment enough to disrupt the balance of forces. Today, traders can anticipate an end to the sideways movement as the results of the FOMC meeting are announced this evening. It is highly likely that the interest rate will be cut by another 0.25%. While this decision may have already been priced in, I still expect heightened trader activity. Increased activity could lead to stronger movements, potentially ending the flat trend. Jerome Powell's speech today could also affect trader sentiment. I anticipate Powell will once again discuss the gradual easing of monetary policy, which could support the US dollar. Additionally, the "dot-plot" graph outlining interest rate expectations for 2025–2026 will be crucial. It will indicate the rate changes expected by most Federal Reserve policymakers. These three events are poised to end the flat trend, although there is no guarantee that this will happen—it is merely a possibility.

Exchange Rates 18.12.2024 analysis

On the 4-hour chart, the pair made its second rebound from the 1.0603 retracement level and continues to decline toward the 127.2% Fibonacci level at 1.0436. A bearish divergence on the CCI indicator also pushes quotes downward. A rebound from the 1.0436 level could lead to some growth in the pair, while a close below this level would increase the likelihood of a further decline toward the next Fibonacci level at 1.0225.

Commitment of Traders (COT) Report

Exchange Rates 18.12.2024 analysis

In the latest reporting week, speculators closed 10,318 long positions and opened 7,766 short positions. The sentiment among the "Non-commercial" group remains bearish and is strengthening, indicating a further decline in the pair. The total number of long positions held by speculators now stands at 157,000, compared to 233,000 short positions.

For thirteen consecutive weeks, major players have been offloading the euro. In my view, this signifies a bearish trend. The primary driver of dollar weakness—expectations of FOMC easing—has already been priced in. The market no longer has a compelling reason to sell the dollar. While such reasons could emerge over time, the rise of the US dollar still seems more likely. Technical analysis also points to the beginning of a long-term bearish trend. Therefore, I expect a prolonged decline in the EUR/USD pair.

News Calendar for the US and Eurozone

  • Eurozone: Consumer Price Index (10:00 UTC)
  • US: Building Permits (13:30 UTC)
  • US: Housing Starts (13:30 UTC)
  • US: FOMC Interest Rate Decision (19:00 UTC)
  • US: Dot-Plot Chart (19:00 UTC)
  • US: FOMC Press Conference (19:30 UTC)

December 18 includes several critical events in the economic calendar. The impact of this news on market sentiment is expected to be strong.

EUR/USD Forecast and Trading Advice

Short positions could have been opened following a rebound from the 1.0603 level on the 4-hour chart, targeting 1.0420 and 1.0320. These trades can remain open. Additionally, short positions are viable after rebounds from the 1.0532 level on the hourly chart. Long positions may become possible if the pair closes above 1.0532 on the hourly chart, though I would avoid risking long trades at this time.

Fibonacci levels were drawn between 1.1003–1.1214 on the hourly chart and 1.0603–1.1214 on the 4-hour chart.

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Samir Klishi,
Analytical expert of InstaSpot
© 2007-2024
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