FxWirePro short term outlook: Euro downside risk-reward attractive against Dollar

There is quite a good chance that FOMC policy announcement would be more hawkish than market is pricing. As of now, market is pricing just 2% probability that rates will rise by 25 basis points but current market and financing conditions suggest, situation is quite ripe for a hike, moreover there are several policymakers on board like Esther George, Loretta Mester, Stanley Fischer and James Bullard, who could vote for a hike. Even if FOMC majority votes for a status quo, large number of dissenters can make the tone more hawkish and signal higher possibility of a hike in June meeting.

One key argument that makes today’s meeting more palatable for a hike is British referendum that follows after eight days after FED’s June meeting. Moreover, a hike today will help FED to keep the pace gradual and keep more wiggle room for maneuver, if inflation jumps as response to higher commodities’ price.

With such expectations, we expect Euro to weaken against Dollar.

Trade idea –

• Sell EUR/USD at current price of 1.132 against Dollar and at rallies.
• Targets for this trade is at 1.113, 1.103 and 1.085. At each target area 1/3rd profit bookings recommended.
• Stop loss for this trade is at 1.148 area.