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EUR/USD: FOMC Meeting Potential Catalyst For Big Move

EUR/USD: FOMC Meeting Potential Catalyst For Big Move

The EUR/USD forex market on the daily chart has been working higher from a double bottom bull flag at the 20 day EMA.

It is important to note that it has been in a tight trading range for 7 weeks. That is not possible unless the bulls and bears are balanced. Therefore, while 5 bull days is good for the bulls, there is no breakout yet. Traders still believe that the 5 day rally is more likely going to form a lower high than successfully break above the range.

EUR/USD Daily

Just look back at the 5 bull days in August. They broke to a new high, but then the EUR/USD reversed down in a bear leg in the range.

Five consecutive bull days, assuming today remains a bull day, make at least a small 2nd leg sideways to up likely. Therefore, traders will buy the 1st 1–3 day pullback.

Tomorrow’s FOMC announcement is a potential catalyst for a big move up or down. It slightly increases the chance of a break above or below the range.

Overnight EUR/USD Forex Trading

The 5 minute chart of the EUR/USD forex market rallied to above yesterday’s high, but then entered a 25 pip tall trading range for 10 hours. Also, the entire day’s range has been small. Day traders are continuing to scalp for 10 pips up and down while they wait for a breakout.

Will today remain a bull day on the daily chart, or will it close on its low and form a sell signal bar for a lower high? With the range as small as it has been overnight, the EUR/USD does not need a big move up or down to form either a bull day closing on its high or a bear day closing on its low.

However, each of those possibilities affect the probability for tomorrow’s direction. The bulls will try to get the day to close on the high and the bears want to get it to close on the low.

With the small range, there is no conviction. Day traders so far are just scalping, betting that the range will remain small.

 

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