EUR/USD and Parity in the Hands of the Fed and Its December Plans

It is a busy day for the EUR/USD on the economic calendar. The German economy is back in the spotlight, with trade and unemployment data for investors to consider. From the euro area, finalized manufacturing PMI figures for France, Germany, and the Eurozone, and manufacturing PMIs for Italy and Spain will also draw interest.

Italy and the Eurozone‘s PMIs and Germany’s trade data will likely have the most influence on the EUR. However, with the Fed in focus, market reaction to the numbers may be short-lived.

Away from the stats, the markets have no ECB member speeches to consider, leaving ECB member chatter with the media to monitor.

EUR/USD Price Action

At the time of writing, the EUR was down 0.03% to $0.98711. A range-bound start to the day saw the EUR/USD fall to an early low of $0.98701 before rising to a high of $0.98799.

Technical Indicators

The EUR/USD needs to move through the $0.9894 pivot to target the First Major Resistance Level (R1) at $0.9934 and the Tuesday high of $0.99543. While the Eurozone economic calendar is busier, the Fed remains the market focal point.

In the case of an extended rally, the bulls will likely take a run at the Second Major Resistance Level (R2) at $0.9995 and parity. The Third Major Resistance Level (R3) sits at $1.0096.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.9833 in play. In the case of an extended sell-off, the EUR/USD pair would likely test the Second Major Support Level (S2) at $0.9792 and support at $0.9750. Hawkish Fed forward guidance would support a sharp pullback.

The third Major Support Level (S3) sits at $0.9691.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 100-day EMA ($0.98770). The 50-day EMA narrowed to the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A EUR/USD move through the 100-day ($0.98770) and the 200-day ($0.98792) EMAs would give the bulls a run at the 50-day EMA ($0.99080) and R1 ($0.9934). However, failure to move through the 100-day ($0.98770) would leave S1 ($0.9833) and sub-$0.98 in view.

The US Session

It is a big day ahead on the US economic calendar. US stats include ADP nonfarm employment change numbers that will draw attention. A sharp increase in payrolls could reverse bets of a December pivot.

However, the main event is the Fed monetary policy decision and press conference. A 75-basis point rate hike would shift focus to the Feds plans for December. With the markets betting on a December pivot, talk of another 75-basis point rate hike would hit the NASDAQ Composite Index and the S&P 500 and drive dollar demand.

No FOMC members will speak to guide the markets following todays stats. The FOMC blackout period started on Saturday and will extend until November 3.

Going into the Wednesday session, the FedWatch Tool had the probability of November and December rate hikes at 84.1% and 50.4%, respectively. One week ago, the likelihood of a 75-basis point hike in December stood at 50.8%.