The Attention Is Focused on the Fed's Meeting

The news feed on the current trading week will be very eventful. The leading central banks will decide on further monetary policies. A number of important statistical data will also be published. At the moment, participants in the financial markets have taken a wait-and-see attitude.

The key event will be a two-day meeting of the Fed under the leadership of the new head Jerome Powell, which will begin on March 20. In late February, Jerome Powell said that the US economy was stable and was growing at a steady pace, interest rates would rise gradually, and high volatility of financial markets didn't carry a significant threat. The official also said that forecasts for raising interest rates could be revised. The latest economic reports from the US confirm the words of the Fed's head. A strong labor market, an increase in business activity in the manufacturing sector and in the service sector will contribute to the growth of consumer spendings. It should be noted that optimistic economic forecasts led to an increase in the yield of 10-year US government bonds to the highs of 2013.

Most participants in the financial markets believe that on March 21, the Fed will raise its key interest rate by 25 basis points to 1.75%. We believe that this event has already been included in the price. We recommend you to pay attention to the comments regarding the further rate of tightening the monetary policy. The regulator will also publish updated economic forecasts, which may indicate prospects for further interest rate increases.

Meeting Probabilities
Source: cmegroup.com
The analysis of the CME exchange data (Chicago Mercantile Exchange) allowed to distinguish the option levels of major players' interest for March 09 – April 06:
  • The resistance zone – 1.2550-1.2650
  • The support zone – 1.2100-1.2200
  • The option balance level – 1.2375
EUR/USD Pattern

At the moment the EUR/USD quotes are below the option balance level of 1.2375, which indicates the power of sellers. The MACD histogram also indicates the bearish sentiment. Nevertheless, in the near future, we recommend opening positions from the key levels.

If the Fed publishes optimistic economic forecasts and points to a further increase in interest rates, demand for the US dollar could significantly rise. The movement may tend to the monthly control zone of 1.2200-1.2100.

Alternative option. If the EUR/USD currency pair overcomes the option balance level of 1.2375, we recommend looking for entry points to the market for opening long positions. The movement is tending to the offer zone of 1.24750-1.25250.

When tracking positions, one should use a trailing stop.

by JustForex, 2018.03.21

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