The traded lower on Tuesday in anticipation of the Federal Open Market Committee’s , which will to take place at 18:00 UTC. The meeting will conclude with an of its decision regarding its monetary policy as the market holds its breath in anticipation.
The Fed is expected to take a hawkish stance, tapering its asset purchases going into the latter stages of 2021. The focus will also be on the dot plot rate hike forecasts as well. The FOMC faces a tough decision as it ponders scaling back its dovish monetary policy amid slowing GDP estimates in, relatively high , and rising COVID-19 cases.
What is expected today?
Market participants expect a hawkish Fed with a strong hint that the taper will begin before the end of the year following a formal announcement in November. Here are the two possible scenarios after the Fed’s meeting:
The hawkish scenario: If the Fed thinks it is time to taper, and if the dot plot predicts a rate hike in late 2022, the US dollar could rise.
The dovish scenario: If the Fed disappoints the market’s expectations, stating that taper conditions haven’t been met and if Fed Chair Jerome Powell downplays the countdown for a rate liftoff, the US dollar could take a plunge.
The dot-plot forecast at 18:00 UTC along with Powell’s press conference at 18:30 UTC, will have traders’ attention.
: If the euro climbs above 1.1765, we expect the pair to test the 1.1770-1.18 price area. A current support zone remains intact between 1.17 and 1.1660. For a bullish breakout we would need a rise above 1.1850, shifting the sentiment in favor of the bulls.
: The pair remains oversold while hovering around 1.3650. If the cable falls below 1.3630 and further 1.36, we see a next lower target at 1.3550. On the upside, there is a resistance zone between 1.38 and 1.39.
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