EUR/USD hits the top of the watchlist after a surprise rate cut from the Federal Reserve. More short-term USD selling ahead?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/USD ahead of the BOE’S monetary policy report hearings, so be sure to check that out to see if there is still a potential play!
|Equity Markets||Bond Yields||Commodities & Crypto|
|DAX: 12155.46 +2.51%
FTSE: 6792.79 +2.07%
S&P 500: 3107.80 +0.57%
DJIA: 26812.49 +0.41%
|US 10-yr 1.101% +0.011
Bund 10-YR -0.612% +0.007
UK 10-YR: 0.389% -0.018
JPN 10-YR: -0.115% +0.014
|Oil: 47.31 +1.20%
Gold: 1623.40 +1.79%
Bitcoin: 8715.54 -1.55%
Etherium: 223.57 -2.37%
Fresh Market Headlines & Economic Data:
- Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent
- ECB’s Holzmann sees no need for rate cut to combat coronavirus
- No need for imminent ECB action on coronavirus: ECB’s Kazimir
- Bank of England’s Carney promises ‘powerful and timely’ coronavirus response
- Euro area unemployment at 7.4%; EU27 at 6.6%
- Industrial producer prices up by 0.4% in both euro area and EU27 in January m/m
- Global dairy prices are down -1.2% since the last auction on Feb. 18
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Fed Press conference at 4:00 pm GMT
- Fed Mester speech at 7:50 pm GMT
- Australia Construction index at 9:30 pm GMT
- API Crude oil inventory at 9:30 pm GMT
- Australia Services PMI at 10:00 pm GMT
- Fed Evans speech at 11:30 pm GMT
- Australia GDP q/q at 12:30 am GMT (Mar. 4)
- Japan Services PMI at 12:30 am GMT (Mar. 4)
- Caixin China services PMI at 1:45 am GMT (Mar. 4)
What to Watch: EUR/USD
In case you missed it, the Federal Reserve just did an emergency rate cut outside of its normal meeting schedule, lowering the target range for the federal funds rate by 0.50%, to 1.00% to 1.25%. Unsurprisingly, the U.S. dollar dropped on the news, but the question now is whether or not we’ll see more selling for the rest of the session.
Of course, that all depends on what Fed Chair Powell will say at the upcoming press conference, and the statement to watch for is whether or not the Fed will raise rates after the Coronavirus story passes.
Focusing on just this session, odds are that the Greenback will remain weak, and it’s likely Powell will stay flexible on the interest rate outlook, all depending on upcoming data and developments. So, EUR/USD looks particularly great for Greenback sellers, which just popped higher on the news to retest the 1.1200 handle. Sellers did hold the line there, but the scenario to watch out for is a sustained break and hold above that level, which could draw in more buyers in the short-term.
Another situation to watch out for is a pullback to the rising lows pattern (around 1.1130 – 1.1150 area) and buying support to form there. If the market drops down to that area, that would be a full daily ATR move (around 70 pips) from the intraday high, which may be enough to attract short-term buyers.
If Powell does confirm the prospect of raising rates after the Coronavirus story, the USD sell off could reverse, a scenario which should be interesting for EUR/USD sellers if the rising ‘lows’ pattern is broken with strong momentum.