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The big event of the week for forex traders is the fast approaching FOMC monetary policy meeting, making EUR/USD a pair to watch for the next few hours.

Intermarket Snapshot

Equity Markets Bond Yields Commodities & Crypto
DAX: 12875.16 -0.50%
FTSE: 7299.40 -0.09%
S&P 500: 3035.09 -0.06%
DJIA: 27059.29 -0.04%
US 10-yr 1.805% -0.03
Bund 10-YR -0.361% -0.005
UK 10-YR: 0.683% -0.028
JPN 10-YR: -0.123% -0.007
Oil: 53.93 +1.16%
Gold: 1488.40 +0.02%
Bitcoin: 9107.71 -3.32%
Etherium: 182.65 -4.12%

Fresh Market Headlines & Economic Data:

Upcoming Potential Catalysts on the Forex Calendar:

  • FOMC Monetary policy statement at 6:00 pm GMT
  • New Zealand Building consents at 9:45 pm GMT
  • Japan Industrial production at 11:50 pm GMT
  • New Zealand Business confidence at 12:00 am GMT (Oct. 31)
  • Australia Building approvals, Import prices, Private sector credit at 12:30 am GMT (Oct. 31)
  • China Manufacturing & Services PMI at 1:00 am GMT (Oct. 31)
  • Bank of Japan Monetary policy statement at 3:00 am GMT (Oct. 31)
  • German Retail sales at 7:00 am GMT (Oct. 31)
  • Euro area CPI & Unemployment rate at 10:00 am GMT (Oct. 31)
  • U.S. Challenger job cuts at 11:30 am GMT (Oct. 31)
  • Canada GDP and inflation at 12:30 pm GMT (Oct. 31)
  • U.S. Core PCE , Personal spending & income

What to Watch: EUR/USD

EUR/USD 1-Hour Forex Chart
EUR/USD 1-Hour Forex Chart

The upcoming forex trading session is overflowing with potential market moving catalysts for almost every major currency, and the most notable of them all is the upcoming U.S. monetary policy statement from the Federal Reserve.  With the potential for short-term fast moves, we like to stick with liquid pairs, and there’s probably no better pair for that situation than EUR/USD.

Expectations are for the Fed to cut interest rates by 25 basis points, but what will likely shake up the Greenback and the financial markets in general is what they hint as their next move. Whether or not they pause rate cutting is the next big question.  The level of uncertainty to that question seems pretty high, so both outcomes is likely to spark market volatility.

So, to keep it very simple, if the scenario arises where they signal further rate cuts, we could see further USD weakness, making a break of the falling ‘highs’ pattern on EUR/USD the signal to watch out for for a potential short-term long position. With a daily ATR of around 50 pips, a break or break-and-retest around 1.1130 could be considered given that the recent swing high around 1.1180 makes for an attractive short-term potential R:R of just under 1:1 with high probability.

If the Fed signals pausing, then shorting at the market will likely be the best entry strategy as the Greenback would likely rally on that news. A more conservative entry approach would be to wait for a break of the recent support around 1.1075, but the potential R:R doesn’t look so great given its distance, unless you’re looking to do a swing/longer-term position trade. With the NFP report later this week, that might not be the best idea.

In the very off chance the Fed actually holds off on any interest rate moves today, the USD has a very high probability of rally, not only on traders switching from recent USD bearish sentiment, but it’s likely financial market sentiment will shift negative (i.e., weaker equities and bond yields) which tends to be USD bullish in a lot of cases. In this scenario a fast daily ATR move to the downside in EUR/USD seems very likely, with a target of 1.1000 reasonable within a session or two.