The EURUSD pair is rising ahead of the FED meeting, due to a drop in bond yields and an increase in positive sentiment due to better data from the Chinese economy.
Rate watchers are currently suggesting that at the FED meeting today we are likely to see 75 basis points hike and a reduction at the next two policy meetings.
With this in mind, the EURUSD is looking even more technical strength, however, sentiment is currently suggesting that a big downturn could take place as traders are very bullish.
The ActivTrader Sentiment tool suggests that 82% of traders are bullish on the EURUSD. This is still very worrying if we consider that traders are still buying despite the latest price drop this week.
As traders, we typically look to fade retail sentiment when it is overly skewed in one direction. This style of trading, fading sentiment, has been one of the most effective and used tactics of hedge funds.
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The EURUSD is currently showing bullish lower lows and higher highs that would indicate that a short-term bottom could be nearing around the 0.9500 area.
This is a bullish chart for the EURUSD over the short-term. This pattern is actually projecting more highs while this remains the case. Only a break under 0.9850 would change this view.
According to the daily time frame, the pair is trapped in a large falling price channel and has projection for the EURUSD around the 0.9400 level also at the bottom of the channel.
As long as the EURUSD pair stays below the 1.000 price level then medium-term analysis shows that further weakness towards 0.9400 is possible.
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