Trade Watchlist: Long-term Short Setup on EUR/USD?

National Financial Solution > Forex Trading > Trade Watchlist: Long-term Short Setup on EUR/USD?


We’ve got a highly anticipated Fed meeting right around the corner, and if they surprise traders with hints of tapering, that could lead to a big move for USD pairs.

What’s expected from the FOMC today and where could it possibly take EUR/USD next?

Long-term Short Setup on EUR/USD?

EUR/USD Daily Forex Chart
EUR/USD Daily Forex Chart

The biggest scheduled event of the week, and likely of the month, is coming in just a few hours in the form of the latest monetary policy statement from the Federal Reserve Open Market Committee.

Traders have been sitting and waiting this week to see whether or not the most recent inflation data may sway the FOMC to change their stance on the high inflation reads and if the Fed may push up their tapering schedule. 

Expectations are that the Fed will maintain that high inflation is transitory and will hold off on tapering until the employment situation broadly improves. If this scenario plays out, the event could be a snoozer for the Greenback, or possibly event a bearish one.

If so, watch EUR/USD for a move higher to the falling trendline /strong  resistance area around 1.2200 on the daily chart above, where the bulls could encounter short-term resistance.

But if we are surprised with a combination of inflation upgrades, taper talk and a dot plot that suggests an earlier than expected rate hike, we could potentially be at the beginning of a USD bullish run against the major currencies, and even other major financial assets.

That makes the failure of the bulls to break above the 1.2200 – 1.2300 area the signal to draw in more technical bears with the fundamental EUR/USD bears (ECB is committed to pandemic stimulus program into Q1 2022) , and creating the potential for a longer-term move in EUR/USD to the previous swing low around 1.1750 over the next couple of months.

What do you guys think? Will we see fireworks this afternoon from the Fed event or will it be a whole lot of nothing? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.



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