Top 5 Events: June Fed Meeting Preview And EURUSD Forecast

06/19 WEDNESDAY | 18:00 GMT | USD FEDERAL RESERVE RATE DECISION AND PRESS CONFERENCE

With trade war concerns raging and global financial markets’ volatility steadily pushing higher, the Federal Reserve’s June meeting on Wednesday comes at a critical moment. The prospect of the US economy’s record 10-year expansion being threatened has garnered the attention of policymakers, with Fed Chair Jerome Powell saying that the Fed would “act as appropriate” if needed in a speech at the start of June.

FEDERAL RESERVE INTEREST RATE EXPECTATIONS (JUNE 18, 2019) (TABLE 1)

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Overall, after getting pulled forwarded quite aggressively with expectations of three 25-bps rate cuts in 2019, rates markets have settled down in the days leading up to the June Fed meeting. While the Fed is unlikely to act in June, it’s very possible that they initiate the first rate cut as soon as the next meeting in July.

Fed funds futures see a 23% chance of a 25-bps cut at the June Fed meeting, but an 83% chance at the July Fed meeting. Meanwhile, there is a 63% chance of a second 25-bps rate cut in September, and overall, an 82% chance of two interest rate cuts before the end of the year.

Pairs to Watch: EURUSDUSDJPYGoldDXY Index

EURUSD TECHNICAL ANALYSIS: DAILY PRICE CHART (AUGUST 2018 TO JUNE 2019) (CHART 1)

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After appearing to start the process of bottoming out at the start of June, a clear lack of follow through to the topside in recent days has seen EURUSD prices lose significant technical support. The bullish piercing candle on June 6 constituted a near-term swing level of support, and a close back below said level at 1.1200 today would be a strong indication that further losses are due in the days ahead.

Momentum is quickly eroding for EURUSD, with price back below the daily 8-, 13-, and 21-EMA envelope, while both daily MACD and Slow Stochastics have started to turn lower (albeit only the latter is in bearish territory at this time). It’s possible that the coming days see EURUSD rates return to the bullish falling wedge pattern; if so, the odds of a reversal back to the yearly lows near 1.1110 would increase.

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