– The minutes from the March Fed meeting is due on Wednesday, April 10 at 18:00 GMT.
– The March Fed meeting saw the FOMC eliminate plans to raises rates in 2019, as well as end its balance sheet reduction process sooner than expected.
Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
04/10 WEDNESDAY | 18:00 GMT | USD March FOMC Meeting Minutes
The Federal Reserve’s March meeting hit markets like an earthquake. Between the decision to eliminate the prospect of a 25-bps rate hike in 2019 as well as end the balance sheet reduction process later this year, traders were caught off guard. Citing a weakening economic backdrop in the United States thanks to the US government shutdown, coupled with a challenging global environment weighed down by trade tensions, the Fed took what some may consider a surprisingly dovish stance.
Significant dislodgements across asset classes – currencies, bonds, equities, commodities – led to the most volatile day of price action in all of 2019. Yet no less than 48-hours after the March Fed meeting, the FX markets kicked into reverse and saw all the Fed-induced US Dollar losses unwind.
In the weeks since, US growth expectations have continued to rebound, up from 0.5% annualized on the day of the March Fed meeting to 2.1% on April 5, according to the Atlanta Fed GDPNow Q1’19 growth tracker (the NY Fed Nowcast is less bull, at 1.5%). As such, the rationale behind the Fed’s latest decisions will come under a microscope this Wednesday; in turn, greater than normal volatility in USD-pairs should be anticpated.
EURUSD Price Chart: Daily Timeframe (December 2017 to April 2019) (Chart 1)
EURUSD’s losing streak took a breather this week, but the overarching bearish bias remains in place. Momentum remains firmly to the downside right now, with price below the daily 8-, 13-, and 21-EMA envelope in sequential order. Similarly, daily MACD and Slow Stochastics are trending lower in bearish territory now. The inside day bar on April 4 and the inverted hammer on April 5 likewise suggest that more downside is possible in the near-term. A retest of the yearly low around 1.1176 should be eyed in the coming days.
IG Client Sentiment Index: EURUSD (April 5, 2019) (Chart 2)
Retail trader data shows 74.5% of traders are net-long with the ratio of traders long to short at 2.93 to 1. In fact, traders have remained net-long since Mar 26 when EURUSD traded near 1.12738; price has moved 0.5% lower since then. The number of traders net-long is 4.8% lower than yesterday and 8.6% higher from last week, while the number of traders net-short is 5.2% lower than yesterday and 3.0% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bearish contrarian trading bias.
FX TRADING RESOURCES
Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher, email him at [email protected]