FOMC minutes preview: What to expect of EUR/USD?

EUR/USD  has been moving all day in a modest trading range of less than 30 pips. At 18:00 GMT the FOMC minutes will be released and are likely to impact on the forex market, increasing volatility. The euro is likely to move out of the current range minutes before the minutes.

Levels to watch

The intra-day outlook remains sideways but in the short-term the bias favors the upside after yesterday’s key break of previous August highs. The area around 1.1230/50 has now become a relevant support.

“The immediate resistance is the 1.1300 figure, with a break above it probably seeing the pair reaching fresh highs in the 1.1340/60 region, whilst above this last, the pair can rally up to 1.1400. The support to keep an eye on is 1.1235, previous high, as only below it the bearish potential will increase, with room to extend down to the 1.1150/60 price zone”, said Valeria Bednarik, Chief Analysts at FXStreet.

Minutes and FOMC members

Yesterday the US dollar was falling sharply but after comments from the New York President, William Dudley, it recovered ground. He signaled that the US central bank was edging closer to raising rates and left the door open to a September rate hike. If today’s minutes point to a September (or a soon) rate hike, the demand for the US dollar could rise, pushing EUR/USD to the downside.

The importance of the minutes could be limited if the are no relevant and consistent indications. “The minutes give a broad impression of views and concerns.  Voters and non-voters are treated equally. The Governors and regional Presidents are indistinguishable.  Yet, time after time, policy is shown to emanate from the Fed's leadership. This may make NY Fed Dudley's press briefing tomorrow, which will include Q&A, more revealing than the minutes themselves”, said analysts from Brown Brothers Harriman.

Simply, dovish minutes would tend to weaken the US dollar while “less dovish” minutes (a hawkish tone would be a surprise) could boost the currency; market participants would decide about the tone of the minutes that many times tend to be equilibrated.