EUR/USD Forecast: ascending trend-channel limiting upside, Fed decision eyed

On Tuesday, the EUR/USD pair extended recent rally and pressed through the 1.1700 handle for the first time since August 2015. The shared currency gained traction after German IFO business climate index bettered expectation and recorded the sixth straight month of improvement to the highest level since 1997. Adding to the ongoing US Dollar slump provided an additional boost to the pair. The pair, however, failed to resist at higher level and retreated over 60-pips from highs amid uncertainty over the Fed's near-term monetary policy outlook. 

The pair now seems to have stabilized near mid-1.1600s as investors keenly await the outcome of a two-day FOMC meeting, due to be announced later during the NY trading session. The Fed is universally expected to keep its monetary policy unchanged and hence, focus would be on the accompanying statement for further clarity on the central bank's plan to unwind its massive $4.5 trillion balance sheet. 

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From a technical perspective, the pair retreated from a short-term ascending trend-channel resistance and hence any subsequent drop below 1.1625 horizontal support could trigger a corrective slide towards mid-1.1500s. A follow through weakness has the potential to extend the corrective slide even below the key 1.15 psychological mark towards an important horizontal resistance break point, now turned support near 1.1470-65 region.

Alternatively, bulls would be aiming for a decisive break through the trend-channel resistance near 1.1710-15 region, also coinciding with August 2015 swing highs, above which a fresh bout of short-covering would pave way for continuation of the pair's strong bullish trajectory towards reclaiming the 1.1800 handle with some intermediate resistance near 1.1760 area.