EUR/USD Forecast: Bulls waiting for the Fed

EUR/USD Current price: 1.1120

• Market participants await the Federal Reserve’s monetary policy announcement.
• The Eurozone confirmed the August Harmonized Index of Consumer Prices at 2.2% YoY.
• EUR/USD losing steam in the near term, but bulls retain control.

The EUR/USD pair hovers around 1.1120 ahead of Wall Street’s opening, little changed on a daily basis. The US Dollar is broadly weak ahead of the Federal Reserve (Fed) monetary policy announcement later in the day, but the Euro can’t take advantage of it.  The Fed is expected to trim interest rates for the first time in four years, with markets anticipating a 25 basis points (bps) cut. However, a larger 50 bps trim is not out of the table.

Even further, the Fed will present a fresh Summary of Economic Projections (SEP) or dot-plot, which may add to the expected peak in volatility. The document could provide clues on what Fed officials plan to do in the upcoming months and whether they will adopt a more conservative or hawkish stance.

In the meantime, the Eurozone confirmed that the Harmonized Index of Consumer Prices (HICP) rose by 2.2% in the year to August. The monthly reading was downwardly revised to 0.1% from the flash estimate of 0.2%. Ahead of the Fed’s decision, the United States (US) published Building Permits and Housing Starts figures for August, up 4.9% and 9.6%, respectively.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is bullish. In the daily chart, the pair is comfortable above a flat 20 Simple Moving Average (SMA) at around 1.1090, while the 100 SMA keeps grinding higher above the 200 SMA, both far below the shorter one. At the same time, the Momentum indicator crossed its midline into positive territory, maintaining a firm upward slope. Finally, the Relative Strength Index (RSI) indicator consolidates at around 58 without signs of upward exhaustion.

EUR/USD is losing its bullish poise in the near term. The 4-hour chart shows that technical indicators head lower, although still above their midlines. At the same time, the price is pressuring a mildly bullish 20 SMA, with a break below it favoring a slide. Still, the upcoming direction will depend on the Fed’s announcement and how financial markets understand the accompanying documents.

Support levels: 1.1090 1.1050 1.1010

Resistance levels: 1.1160 1.1200 1.1250