The euro sold off rather significantly on Monday but also bounced a bit to form a hammer. The question at this point in time is whether or not we are going to bounce from here, or if we are simply going to go back and forth. A lot of this is going to come down to the FOMC statement on Wednesday, because a lot of people are very concerned about whether or not the FOMC is going to sound dovish or hawkish.
When you look at this chart, it is worth noting that the 50 day EMA sits at the 1.1369 handle, just above the recent consolidation area that we have been in. Because of this, there is a certain amount of technical resistance just above that a lot of people will pay attention to, but I think this is a market that is going to be paying more attention to the FOMC statement and press conference on Wednesday than anything else. Because of this, I believe there is only a matter of time before we see a bigger move. With this, Tuesday might be a bit of a quiet trading session, as perhaps traders may try to bet on whether or not Jerome Powell will sound hawkish or dovish. I think at this point it is a bit of a 50-50 proposition, so it is going to be reckless to try and guess what he is going to do.
This is a market that will continue to be noisy and chop around, but I think we will get some type of clarity over the next couple of days. I think that noise and chop are going to be the mainstays of this pair. After all, the euro typically will chop around relentlessly, suddenly shoot in one direction, and then chop around for a few more weeks. I do not see any reason why this would change in the short term, so I think at this point we are looking at a market that is going to be driven solely upon the idea of what panic we have next. The only thing you can do this point is to be very cautious about your position size.
