Global markets remain near record highs, but the currency market shifts to a cautious trading tone ahead of the Feds midweek meeting.
EURUSD, the worlds most actively traded currency pair, retreated into the 1.2100 area on Friday night. We note how, for the second time this year, the EURUSD has lost its impulse growth at 1.2200, and we see an intensification of selling on the growth.
Right now, EURUSD is trading near the 50day moving average. A bounce up from this level would suggest that the upside trend in the pair will continue. A fall below, however, would make the pair consider a break in the rising trend. The next major support is at 1.2000. It is not only a significant round level for the pair, but it is also crossed by the 200 SMA, which often separates the longterm rising and falling trends.
False breaks, like the one that happened in March, sometimes occur, but most of the time, its signals are correct, repeatedly identifying reversals in the previous years.
Also worth noting is the indecisiveness of the dollar bears. We have noticed that in the history of the European currency, the EURUSD slips to 1.2000, like this year, preceding pullbacks and keeping the pair in the area in recent ranges. A decisive breakout indicates the seriousness of the intention to move into the next one.
And here, it is essential to realise that this weeks FOMC meeting looks set to determine the dollars direction. Last week the ECB signalled its willingness to maintain its…