- This week, the forex market could see higher-than-usual activity with key central bank decisions and economic data releases.
- The Fed and BoE meetings, along with the NFPs report, will impact EUR/USD and GBP/USD pairs.
- These two pairs could therefore create high potential opportunities for traders.
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This week promises significant activity in the forex market as investors await key central bank decisions and economic data releases.
The Federal Reserve and Bank of England meetings, along with the crucial nonfarm payroll report, will shape the direction of currency pairs like EUR/USD and GBP/USD.
Ultimately, the interplay between central bank policies, economic data, and technical factors could create high-potential trading setups in the aforementioned pairs.
Global Interest Rate Cut Cycle Gains Momentum
Over recent months, a global trend of interest rate cuts has emerged, likely to be joined soon by the Fed and the Bank of England.
Major players like the European Central Bank, the Swiss National Bank, and the People's Bank of China have already initiated cuts.
This effort follows the inflation surge caused by the pandemic and the rising geopolitical tensions.
With the US dollar still dominating the global financial system, the Federal Reserve's actions will significantly impact currency pairs involving the dollar.
The market has already priced in a September rate cut, but a broader downward trend in the US dollar requires the Fed to signal a full-fledged pivot, beginning this year and continuing into 2025.
So keeping that in mind, here are two attractive trading steps for EUR/USD and GBP/USD pair.
1. EUR/USD Breaks Out of Local Wedge Formation
EUR/USD has been trading in a narrow range for less than a week, forming a wedge pattern that favors a continuation of its downward movement.
After defending the resistance at 1.0870, sellers broke below the wedge, setting up a short-term bearish scenario.
The first target for sellers is to push below the local low of 1.0820, opening the path to the key support level just below the 1.08 mark.
The next target is around 1.0670, but achieving this would likely require a hawkish signal from the Fed in its upcoming meeting.
2. GBP/USD Breaks Another Support
GBP/USD continues its corrective movement, breaking through significant support levels at 1.29 and 1.2850. The next challenge for sellers is to breach the demand zone at 1.28, coinciding with the recent correction in the uptrend.
If sellers succeed in breaking 1.28, the main target becomes the 1.26 barrier, which was heavily tested in late June and early July. Conversely, if the correction ends, investor focus may shift to the 1.31 region, where a long-term supply zone is located.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.