The EUR/USD pair and the traditional FX market have taken a step back when it comes to volatility. The volatility in the financial markets dropped to extremely low levels, as seen by the S&P500 index closing about 0.22% from the highs or lows of the previous day for seven consecutive days.
When the stock market is not moving, nothing is moving, as everyone waits for the central banks to do something. At this point, the only thing that could be done is to taper the asset purchases at least in the United States.
The Fed already delivered some hints that it might be close to doing so. For example, the FOMC member Brainard used the word patience several times in the last three speeches – seven times in the first one, four times in the second, and zero times in the most recent one. Also, the Fed announced yesterday that it is getting ready to take profit on some ETF longs – suggesting tapering is just around the corner.
All in all, the Fed’s June meeting might be a game-changer.
The technical picture looks weak, suggesting more downside on the EUR/USD pair. The market formed a double top at 1.2250, and a triangle is also visible. A move below 1.2150 might be just what bears need. On such a move, one might want to sell with a stop at 1.2250 and a take-profit at 1.20 and beyond.
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