A combination of supporting factors helped the EUR/USD pair to continue gaining positive traction on Tuesday and climb to a fresh two-week high level of 1.1362. The shared currency found some support from stronger than expected German ZEW economic sentiment index, showing an improvement to -3.6 for March as compared to -13.4 in the previous month. Adding to this, the prevalent US Dollar selling bias, amid growing market expectations that the Fed might opt for a more accommodative policy stance, provided an additional boost and remained supportive.
The uptick, however, lacked any strong follow-through and once again started losing steam near 50/100-day SMAs confluence resistance. The pair traded with a mild negative bias through the Asian session on Wednesday and for now seems to have snapped three consecutive days of winning streak as market participants start repositioning for today's key event risk - the latest FOMC monetary policy update.
The Federal Reserve is widely expected to keep interest rates unchanged and reiterate that it’s in no hurry to make another move. Hence, the key focus will be on the accompanying monetary policy statement and updated economic projections. A more dovish sounding Fed would be enough to trigger a fresh bout of USD selling and assist the pair to build on the recent positive momentum.
From a technical perspective, the pair has been struggling to make it through the mentioned confluence region, which is followed by a five-month-old descending trend-line resistance near the 1.1400 region. Only a sustained break through the said barrier would negate any near-term negative bias and pave the way for a follow-through up-move mid-1.1400s en-route the 1.1485-90 supply zone.
On the flip side, weakness below the 1.1330 level now seems to find some support near the 1.1300 handle, below which a fresh bout of technical selling is likely to accelerate the slide towards 1.1255 intermediate support before the pair eventually drops to challenge the 1.1200 round figure mark. Failure to defend the said handle would indicate the resumption of the prior well-established bearish trend and drag the pair further towards testing the 1.1100 mark in the near-term.
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