Cautious traders' sentiment amid upcoming Fed meeting | 21 Agosto 2024

An event to look out for today:

21:00 GMT+3. USD - Publication of the Fed meeting minutes

EURUSD:

EUR/USD is starting to lose bullish momentum and is trading close to 1.1120, breaking a three-day winning streak during the early European session on Wednesday. The cautious sentiment in the markets ahead of the release of the minutes of the July Federal Open Market Committee (FOMC) meeting on Wednesday is providing some support to the US Dollar.

At its July meeting, the FOMC kept the federal funds rate unchanged in the 5.25-5.50 per cent range. During the press conference, Fed Chairman Jerome Powell noted that a rate cut could be considered if inflation continues to decline. The dovish tone of the meeting led the dollar lower in previous sessions. However, cautious sentiment ahead of the key event is boosting safe-haven currencies such as the US Dollar (USD) and creating a headwind for the EUR to USD pairing.

On Friday, traders will shift their focus to Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium for further clues on the Fed's plans. According to the CME FedWatch Tool, financial markets estimate the probability that the Fed will cut interest rates by 25 basis points (bps) in September is nearly 67.5%.

Across the pond, European Central Bank (ECB) policymaker Olli Rehn said on Monday that the ECB may have to cut interest rates again in September due to continued economic weakness. Rehn stressed that the recent intensification of negative growth risks in the eurozone has supported the case for an ECB rate cut at the September meeting. Traders believe there is a 90% probability of a 25bp cut in the deposit rate to 3.5% in September and expect at least one more change before the end of the year.

Trading recommendation: Trade mainly with buy orders at the price level of 1.1135. We consider sell orders at the price level of 1.1090.

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