I believe that much of the selling in this pair is probably due to people stepping away from the currency markets as we await confirmation from the Federal Reserve as to what they might be doing over the next year. There is an argument that we are looking at 3 interest rate hikes, just as there is an argument that we are looking at 4. I think that will continue to be the major driving factor in the currency markets over the next couple of sessions, and the statement coming out of the Federal Reserve late today will be parsed by currency traders around the world to understand expectations.
I think if the Federal Reserve dot plot suggests 4 interest rate hikes, we could see this market roll over rather significantly. However, if it suggests that we are only going to see 3 this year, this pair should continue to go higher. Ultimately, the 1.43 level above will be resistance, which was the most recent high. If we can break above there, the market should then go to the 1.45 handle. There’s a lot of noise in this market right now, so waiting until the Federal Reserve releases its statement is probably the best way to go as there will be a lot of headline risk in the short term. Until then, I’m on the sidelines when it comes to this pair because we have so much in the way of conflicting opinions in this market, as we see in several other Forex pairs.
Written by FX Empire