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Forecast for EUR/USD on January 26


Relevance up to 10:00 2022-01-27 UTC+00

The EUR/USD pair performed a new fall in the direction of the corrective level of 1.1250 on Tuesday. This morning, the fall resumed again after a slight pullback. The rebound of quotes from the level of 1.1250 or the lower border of the side corridor may work in favor of the euro. However, it will be possible to draw such conclusions no earlier than Thursday, when the reaction period to today’s event will pass. Today, the mood of traders may change dramatically after the Fed announces the decisions taken during the meeting. There is no other information background for today. Therefore, you should figure out what to expect from the Fed in the evening. And here, I must say, there is a huge number of opinions. Let’s start with the most expected. The quantitative easing program, which, according to every one’s opinion, should be fully completed in March, should be reduced by some more value today. Let me remind you that at the meeting before last it was decided to reduce the program by $ 15 billion, and a month later – by $ 30 billion a month.

Thus, to be in time by March, a reduction of at least $ 30 billion should be announced today. But if the Fed decides to “trim” a larger amount by a billion from the program, this could lead to an increase in the dollar. The second issue that should be dealt with is the rate increase. All FOMC members as one said they would support a rate hike in March. However, some believe that today’s meeting may end with a loud surprise in the form of the first interest rate increase since 2015. I don’t think the Fed will start raising rates before it completes the QE program. However, given the highest inflation in the United States in 40 years, anything can happen. I think that in the evening it will be announced that the QE program will be reduced by more than $ 30 billion, and Jerome Powell will also announce an interest rate increase at the next meeting in March. These two moments should be enough for bear traders to start selling the pair again, which will lead to stronger growth of the US currency. The Fed’s more dovish rhetoric may disappoint traders and lead to a fall in the US dollar.

News calendar for the USA and the European Union:

US – FOMC decision on the main interest rate (19:00 UTC).

US – accompanying FOMC statement (19:00 UTC).

US – FOMC press conference (19:30 UTC)

On January 26, the calendar of economic events of the European Union is empty, and in America, all events are scheduled for the evening. The influence of the information background on the mood of traders may be strong today, as the FOMC meeting is the most important event for the dollar.

EUR/USD forecast and recommendations to traders:

It is recommended to sell the pair if a clear closing is made under the trend line on the hourly chart, with a target of 1.1357. Now, these trades can be kept open with a target of 1.1250, as there were two rebounds from the level of 1.1357. I recommend buying a pair if there is a rebound from the 1.1250 level on the hourly chart, but tonight the mood of traders may change very sharply.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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