EURUSD is slowly grinding higher moving inside a rising wedge formation on its 1-hour time frame. A breakout in either direction could lead to a 200-pip move, which is the same size as the wedge pattern.
The 100 SMA is above the longer-term 200 SMA, suggesting that the path of least resistance is to the upside. Both RSI and stochastic are on the move up, also suggesting that further gains are likely. However, if the wedge resistance at the 1.3100 major psychological level holds, a move back to the support at 1.1200 might take place.
Event risks for this trade include the release of the monetary policy meeting minutes from the ECB and the FOMC. The ECB will be printing its monetary policy meeting accounts during the London session, possibly leading to a euro selloff if policymakers are generally dovish. Recall that it was during this September meeting that ECB Governor Mario Draghi shared that they’re open to increasing stimulus if inflationary pressures fall further.
Meanwhile, the FOMC minutes due during the end of the US trading session could still inspire volatility among dollar pairs, especially if committee members have expressed strong support for a liftoff before the end of the year. However, traders might not be too sold on any hawkish remarks since this meeting was conducted prior to the release of the downbeat September NFP report.
Other potential catalyts for a move include the release of French and Italian industrial production data on Friday, along with US import prices data. FOMC members Williams, Lockhart, and Evans are also scheduled to give testimonies towards the end of the week and their remarks could have a strong impact on dollar movements, especially if they incorporate the latest jobs figures in their assessment.
By Kate Curtis from Trader’s Way