The FOMC Minutes Will Determine Sentiments on Majors

From the middle of April, the dollar index (#DX) has been showing a pronounced upward trend. During this period, the US dollar has strengthened against the basket of world currencies by more than 4.5%. At the moment, #DX is testing annual highs. Demand for the US currency is still high amid rising yields of US 10-year government bonds. The indicator has risen to the highs of 2011 and has reached the level of 3.12%.

The key event in the current trading week will be publication of the minutes of the last FOMC meeting on May 23 (at 21:00 GMT+3:00). This report has a significant impact on the dynamics of major currency pairs. The minutes disclose the position of the US Central Bank and some FOMC representatives on the monetary policy. The FOMC minutes also contain information on further raising the Fed's key interest rate.

It should be recalled that in 2017, the Fed increased the key interest three times. This year the Central Bank predicts similar rates of tightening the monetary policy. At the same time, positive economic reports, a rapid increase in the yield of US government bonds, as well as optimistic inflation expectations gave reasons for a more aggressive increase in the interest rate. Some experts suggest that the regulator may raise the interest rate four times this year.

US Fed Funds Rate
Source: tradingeconomics.com

If the FOMC reports point to optimistic economic forecasts and more aggressive interest rate increase, the US dollar will continue to strengthen against the majors.

The analysis of the CME exchange data (Chicago Mercantile Exchange) allowed to distinguish the option levels of major players' interest for May 04 – June 08:
  • The resistance zone – 1.2150-1.2250
  • The support zone – 1.1700-1.1800
  • The option balance level – 1.1975
EUR/USD Pattern

At the moment, the EUR/USD currency pair is below the option balance level of 1.1975, which indicates the bearish sentiment. The MACD histogram also signals the power of sellers. The trading instrument is tending potentially to reduce.

If the price fixes below the 1.1700-1.1800 support zone, the EUR/USD quotes are expected to fall further. The immediate goal of profit taking is 1.16500.

Alternative option. If the FOMC minutes are pessimistic, the EUR/USD currency pair may test the option balance level of 1.1975.

When tracking positions, one should use a trailing stop.

by JustForex, 2018.05.22

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Open Account

Get Free Analytics

* required fields
Last Articles
All Articles
The Best Time to Trade USD/CAD
The US dollar and Canadian dollar form one of the most popular currency pairs. It represents a significant quota of daily trade. It's popular among both professionals and ultimate newbies.
Read more
Full Guide to Forex Trading in South Africa
Forex trading is a popular form of short-time investment and a source of additional or main income for many people all over the world. Forex trading is available in South Africa, but many potential traders just do not know how to make the first steps in this field. This full beginner’s guide explains the base of Forex and its key terms.
Read more
How to Learn Forex Trading for Beginners in 2022
We want to present a guide for beginner Forex traders that will give the main ideas on how to start Forex trading in the most effective way and how to earn on purchasing and selling currencies. Professional traders have designed the Forex trader tutorial whose extensive experience helped optimize its structure and content. It offers all the necessary information to start your trading journey in 2022.
Read more