The FOMC meeting minutes are a snapshot of the past. Following their release, disappointing US employment data came out. However, the market has gotten used to looking for signals in such reports. Will it work this time? Let’s evaluate the situation and develop a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- Closed stock markets gave the US dollar a boost.
- Investors are looking for clues in the FOMC minutes.
- High central bank interest rates are likely to persist.
- Long positions on the EUR/USD pair can be opened on a rebound from 1.1400.
Weekly Fundamental Forecast for Dollar
Under Kevin Warsh, the Fed is shifting to a “talk less, think more” approach to avoid being caught out by its own words. In this regard, the market’s attempts to detect a rift within the FOMC in the minutes of the June meeting will be like reading between the lines. Most likely, the document will be redacted just as heavily as the accompanying statement. Such are the realities; they heighten uncertainty and support the US dollar.
One might think that the reduced likelihood of the Fed tightening monetary policy—following Kevin Warsh’s less hawkish remarks in Sintra and disappointing US labor market data—should have hit the greenback hard. It did indeed post its worst weekly performance since April, but managed to stabilize. For the EUR/USD rally to continue, the odds would need to worsen further—and that can only happen if macroeconomic data deteriorates. Is anyone willing to guarantee that will happen?
The RBNZ is the only one of the six G10 central banks meeting in July with a higher probability of raising rates than the Fed. The ECB, the Bank of England, the Bank of Japan, and the Bank of Canada are most likely to maintain their current policies. Overall, according to Bloomberg forecasts, borrowing costs will be higher than anticipated before the attacks on Iran due to the conflict in the Middle East and the costs of artificial intelligence technology.
Forecast for Interest Rates
Source: Bloomberg.
For example, the federal funds rate was projected to fall by 100 basis points by mid-2027. Now, it is expected to drop by only 25 basis points. The longer the rate remains at a high level, the more attractive US assets become, and the stronger the US dollar will be.
This situation is forcing asset managers and major banks to stop using the greenback as the funding currency in carry trade operations. Speculators are increasingly using the yen and the euro to trade against emerging-market currencies. This is changing the EUR/USD pair’s reaction to stock index movements and the associated shifts in global risk appetite. Whereas the pair previously rose amid an S&P 500 rally, it will now hesitate to do so.
However, it was precisely the closure of US stock markets ahead of Independence Day that allowed EUR/USD quotes to stabilize. The US dollar took a breather amid a lack of major news and began preparing for a new battle.
Weekly Trading Plan for EUR/USD
The minutes from the June FOMC meeting are unlikely to be as hawkish as Kevin Warsh’s remarks during the press conference. As a result, the recent “buy the rumor” move in the US dollar could give way to a classic “sell the news” reaction. This scenario would create an opportunity to build long positions if the EUR/USD pair rebounds from the 1.1400 support level. Alternatively, a sustained break above 1.1460 would provide another attractive entry point for buying the euro.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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