EUR/USD forecast: 1.1200 marks a key support ahead of FOMC on Wednesday

The EUR/USD pair found decent support near the 1.1200 handle and edged higher at the start of a new trading week, albeit lacked any strong follow-through buying. The shared currency was underpinned by record wage growth, which rose 2.4% yearly rate in Q1 but was still short of consensus estimates 2.6%. The uptick got an additional boost in the wake of some renewed US Dollar selling following the disappointing release of Empire State Manufacturing Index. In fact, manufacturing activity in the New York region posted a record drop and fell into contraction territory for the first time in more than two years. 

Against the backdrop of softer May monthly jobs report and weak inflation, the data bolstered the case for an eventual rate cut move by the Fed later this year and exerted some downward pressure on the greenback. The pair touched an intraday high level of 1.1247 and finally settled with only marginal gains, snapping three consecutive days of winning streak. The pair managed to regain some positive traction during the Asian session on Tuesday, though might continue to struggle at higher levels as investors might still be reluctant to place any aggressive bets ahead of the latest FOMC monetary policy update on Wednesday. 

In the meantime, Tuesday's economic docket - featuring the release of German ZEW survey for June and the final Euro-zone inflation figures for May might provide some short-term impetus. Later during the early North-American session, the release of US housing market data - housing starts and building permits, might further collaborate towards producing some meaningful trading opportunities. 

From a technical perspective, bearish traders are likely to wait for a sustained weakness below the 1.1200 temporary support - marking 61.8% Fibonacci retracement level of the 1.1107-1.1348 recent up-move, before positioning for any further depreciating move. A convincing breakthrough will suggest the resumption of the prior bearish trend and turn the pair vulnerable to accelerate the slide back towards challenging the 1.1100 round figure mark with some intermediate support near mid-1.1100s.

On the flip side, the 1.1250-55 area (38.2% Fibo. level) now becomes immediate strong resistance and is closely followed by 100-day SMA near the 1.1270 region, which if cleared decisively might negate the near-term bearish bias and prompt a near-term short-covering move. The positive momentum could then get extended further beyond the 1.1300 round figure mark towards retesting the 1.1325-30 supply zone en-route the recent swing high, around mid-1.1300s.