UNITED STATES—November will be a relatively less chaotic month in the currency markets so far, which have witnessed a lot of turbulence. Indeed, the month opens with some news that the EUR/USD pair finds support at 0.9850. Further, the dollar’s charge ahead has reached its peak, with reports claiming that the next Fed hike will not be so damaging.
The direction taken by the Fed has grabbed the attention of traders for the better part of the year. Indeed, situations like inflation and the political instability in Eastern Europe have had a lot of say in the markets, even exceeding prompts such as what’s the best forex trading platform for beginners in various search engines. Different fundamentals have dominated the market so far, with events such as the Euro parity with the dollar being an important one in the year. In the weeks leading to November, the scheduled FOMC meeting has taken precedence—it will outline the next steps the Fed will take in the weeks leading to Christmas.
Behind the Scenes of the Currency markets
In the week ending October, the Euro made a final gasp to outstrip the dollar in value after weeks below parity. However, the rally was short-lived and dipped again below parity. The momentum of the Eurozone currency was because of the ECB meeting that coincided with the short-lived rise, which outlined some hawkish steps to deal with rising inflation in the Euro area.
The European Union has decided on a data-driven approach to set monetary policies that will influence currency movement in the zone. Ultimately, issues like employment rates, cost of living, and the long-term financial health of the economic zone will play a significant role in setting interest rates.
Meanwhile, the inflation rates continue to bite in Europe and all over the world. Higher inflation rates will mean higher interest rate. As ongoing rises of prices continue due to inflation people will fully understand the value of money even without entering the world of trading currency.
The FOMC Meeting
One of the most anticipated events in the currency markets is the central bank meetings. The Fed’s possible action after the November meeting is to set higher interest rates that will cause some turbulence in the currency markets. The anticipated hike, which will probably be near 75 bp is a cautionary approach to set lower rates in December.
Indeed, over the years to date, the Fed has tended towards a dovish dimension not wanting to upset different elements of the markets, which have so far taken a hit following rapid rises in interest rates. To that effect, the December bp rates have a 50 percent chance of falling in the 50s territory. The dovish tone might be a resistance towards a hawkish attitude to avoid a scenario of the markets hitting the lows already experienced so far.
Traders’ Likely Response to the Markets
The weakening of selling momentum in the market prepares a surge of a bullish attitude in the currency markets. The hint, which stems from a candle bar close to a bullish inside bar situation, shows signs of more traders going big for the USD.
At the end of October, the 100 SMA was the resistance point, which is trending between 20 and 50 currently. On the daily charts, the currency markets have registered higher lows and higher highs to date since the start of the year. Such events are a significant pointer to higher trading activities in the market, which might only take a small hit from the November FOMC meeting.
The support areas also have a lot of say in the likely action taken by investors. Candle closes, not being able to reach the 0.9700 area in the EUR/USD pair, might open the markets to new lows registered in the year to date.
Playing with Volatility
Volatility in the currency market in the year to date has created a lot of opportunities and losses alike. However, as the year surges to an end, weakening momentum to sell is ushering in a new bullish attitude in the market. The Eurozone’s positive attitude towards stemming inflation and the Fed’s dovish tone are signs that more investors will swoop into the currency markets.
