EUR/USD analysis: Fed to end range trading

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1946

Despite advancing for a second consecutive day on Friday, the EUR/USD pair closed the week in the red at 1.1946. Friday's advance was backed by soft US data, as August Retail Sales fell by 0.2% from a month earlier, which additionally suffered downside revisions. In the same month, Industrial Production fell by 0.9% while Capacity Utilization edged lower, to 76.1%. The pair eased from Friday's high at the end of the day, as the Michigan consumer sentiment index for September beat expectations, coming in at 95.3, still below August reading of 96.8.

All through the week, attempts to regain the 1.2000 level failed, rather on upward exhaustion than on self dollar's strength. The greenback can't find its way higher, although some light have appeared at the end of the tunnel, as mid-week, the Trump administration hinted it will start working on the tax reform before the month end. Wall Street rallied to record highs on the news, but the dollar remained subdued. Anyway, the market is now focused on the upcoming Fed's monetary policy decision this Wednesday. The Central Bank is expected to keep rates unchanged, but also to announce details on their plan to reduce the balance sheet. Additionally, the dot-plot will give some hints on how policymakers are positioned towards next rate hikes.

The pair consolidated near 2017 highs for a second consecutive week, settling above a bullish 20 DMA in the daily chart, and with technical indicators having regained the upside, limiting the risk of a deeper correction ahead that anyway will depend on market's reaction to Fed's decision. A long term ascendant trend line coming from April this year stands for this Monday around 1.1825, whilst August 31st low comes at 1.1822, making of the region a key support for the upcoming days, as below it, the pair could extend its slide down to 1.1667, the low set on August 17th. Short term, the 4 hours chart shows that the price has managed to recover above its 20 and 100 SMAs that anyway converge within a tight range, around 1.1910, whilst technical indicators have reentered positive territory by the end of the week, but lack enough momentum to support a new leg north.

Support levels: 1.1920 1.1860 1.1825

Resistance levels: 1.1965 1.2000 1.2045

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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