EUR/USD analysis: Divided FOMC does little to change the near-term neutral bias

The EUR/USD pair came under some renewed selling pressure on Wednesday and eroded a major part of the previous session's positive move, albeit remained well within a familiar trading range held over the past two weeks or so. The initial leg of the intraday pullback came after the release of final Euro-zone inflation figures, which showed that the headline CPI rose 0.1% in August as compared to 0.2% anticipated. On the other hand, the annual inflation rate was confirmed at 1.0% while core prices rose 0.9% and exerted some pressure on the shared currency.

Hawkish Fed cut exerted some pressure

Meanwhile, the downtick accelerated further after the Fed, as was widely expected, lowered policy rate by 25 bps for the second time but the language of the accompanying statement raised questions if there will be another rate cut this year. The so-called dot-plot showed that the median projections of federal funds rate would be at present levels through the end of 2020, suggesting that the Fed is already done with its mid-cycle adjustments and provided a goodish lift to the US Dollar. Moreover, there were several dissenting votes, James Bullard wanted to cut 50 bps cut while Esther L. George and Eric S. Rosengren preferred to stand pat, implying that further rate reductions were not guaranteed.
 
The pair dropped to an intraday low level of 1.1014 in reaction to the hawkish cut but managed to find some support at lower levels after the Fed Chair Jerome Powell's comments at the post-meeting press conference suggested that the central bank was open to another cut before the year-end. The pair finally settled around 15 pips off session lows and edged higher during the Asian session on Thursday. In absence of any major market-moving economic releases from the Euro-zone, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum. Later during the early North-American session, the US economic docket - featuring the release of initial weekly jobless claims and Philly Fed Manufacturing Index - might contribute towards producing some short-term trading opportunities.

Short-term technical outlook

Given the pair's inability to capitalize on attempted bullish moves, the risk remains skewed to the downside, though bearish traders are likely to wait for a sustained weakness below the key 1.10 psychological mark. Below the mentioned handle, the pair seems more likely to resume its prior/well-established bearish trend and accelerate the slide back towards challenging 2019 swing lows support near the 1.0925 region. The downward trajectory might then turn the pair vulnerable to break through the 1.0900 handle and head towards testing its next major support near the 1.0840-35 region.
 
On the flip side, the pair needs to decisively move beyond a three-month-old descending trend-line resistance in order to increase prospects for any further near-term recovery. Convincing break through the mentioned barrier, currently around the 1.1080 region, now seems to set the stage for a more beyond the 1.1100 round-figure mark, and 1.1145 intermediate resistance, towards challenging 100-day SMA near the 1.1175-80 region en-route the 1.1200 handle.