EUR/USD Forecast: Bulls seem non-committed ahead of FOMC on Wednesday

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EUR/USD Forecast: Bulls seem non-committed ahead of FOMC on Wednesday

Sustained USD selling bias assisted EUR/USD to gain traction for the fifth straight session on Tuesday. Uncertainty over the US fiscal stimulus measu

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Sustained USD selling bias assisted EUR/USD to gain traction for the fifth straight session on Tuesday.
Uncertainty over the US fiscal stimulus measures, the prevalent risk-on mood undermined the buck.
The common currency was further supported by the ECB’s upbeat economic assessment last week.
The EUR/USD pair advanced for the fifth consecutive session on Tuesday amid the prevalent selling bias surrounding the US dollar, weighed down by fading prospects for the next round of the US fiscal stimulus measures. Apart from this, the upbeat market mood – as depicted by a strong rally in the equity markets – further undermined the greenback’s relative safe-haven status. The global risk sentiment got a strong boost on the first day of a new trading week after AstraZeneca announced the resumption of the phase-3 trials for its COVID-19 vaccine candidate. The risk-on flow remained unabated through the Asian session on Tuesday, rather picked up pace following the release of upbeat Chinese data.

On the other hand, the shared currency continued benefitting from the ECB’s relatively optimistic view of the region’s economic recovery. The ECB also talked down the euro’s recent appreciation and further impressed bullish traders. Despite the supporting factors, the pair remained well within a familiar trading range as investors remain cautious ahead of this week’s key central bank events, in particular the FOMC decision on Wednesday. Given that the Fed Chair Jerome Powell unveiled a shift toward greater tolerance of inflation, the key focus will be on the updated economic/inflation projections and fresh clues that interest rates will stay lower for a longer period of time.
In the meantime, Tuesday’s release of the Eurozone and German ZEW Survey will be looked upon for some impetus. The US economic docket features the release of the Empire State Manufacturing Index and Industrial Production data, which could influence the USD price dynamics and produce some trading opportunities. Apart from this, some repositioning trade might further contribute to infuse some volatility around the major.

Short-term technical outlook
From a technical perspective, any subsequent positive move beyond the 1.1900 mark is likely to confront a stiff resistance near the 1.1935-40 supply zone. Sustained strength above will negate any near-term bearish bias and push the pair back above the 1.2000 mark. Some follow-through buying beyond YTD tops should pave the way for an extension of the recent bullish trajectory. Bulls might then aim to reclaim the 1.2100 mark before eventually lifting the pair further towards the 1.2190-1.2200 zone.

On the flip side, the 1.1850 region now seems to protect the immediate downside. This is followed by the 1.1800 mark, which if broken might turn the pair vulnerable to accelerate the fall back towards the 1.1750 strong horizontal support. A convincing breakthrough the mentioned support will be seen as a fresh trigger for bearish traders and drag the pair further towards August monthly swing lows, around the 1.1700-1.1695 region.

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