Until the results of the FOMC meeting are known on September 18th the bias in euro is to buy on dips with the preference to purchase the united currency below 1.3300.
1.3370 Fibonacci- 76.4% retracement of the 1.3452-1.3105 drop
1.3350 Offers, August 29th high 1.3343
1.3325 High Wednesday and Thursday, September 11th & 12th
1.3320 Moderate offers
1.3319 Fibbonacci-61.8% retracement of 1.3452-1.3105 drop
1.3299 Market bid 6:30 pm EDT
1.3280 Moderate buying
1.3278 50% retracement of 1.3452-1.3105 drop
1.3250 Strong buying demand
1.3244 Low September 11th
1.3238 Fibbonacci-38.2% of 1.3452-1.3105 drop
1.3230 Low September 10th
1.3200 Moderate demand
1.3154 200 day moving average
1.3150 Strong demand, 100-day moving average
While waiting for the Fed decision on the 18th expect constricting ranges as traders will be reluctant to speculate on Fed policy and its effect on the dollar. A small, largely symbolic reduction in QE is probably priced into the euro level but with the disappointing payroll report for August even the odds on that have diminished.
A postponement of the QE taper will provide a lift for the euro. Although, unless it is accompanied by language that undermines the assumption that the next Fed policy move is the beginning of the end of QE, the euro is unlikely to go very far. It should be restrained by the twin facts of a US economy far stronger than Europe’s and that the end of QE and the widening of the EMU- US rate differential is still the assumed Fed policy.