EUR/USD Forecast: Dollar up ahead of Fed

EUR/USD Current Price: 1.1796

• The greenback strengthens ahead of the US Federal Reserve announcement.
• The spread of COVID-19 in the US could turn policymakers more cautious.
• EUR/USD is technically bearish, needs to break below 1.1750.

The EUR/USD pair hovers around the 1.1790 level, confined to a tight range ahead of the US Federal Reserve monetary policy announcement. The dollar is strengthening across the board, although without breaking any relevant level and with major pairs holding within familiar levels.  Meanwhile, stocks trade with a positive tone, with European indexes holding into the green. Government bond yields ticked higher, but generally speaking, financial markets are in wait-and-see mode.

So far, the macroeconomic calendar included the German GFK survey, which printed at -0.3 in August, worse than expected. The US June Goods Trade Balance posted a deficit of $91.2 billion, according to preliminary estimates.

The US Federal Reserve is expected to maintain rates and the massive support programs unchanged. However, investors are hoping for a clearer picture of future tapering. The central bank has already suggested it will start reducing assets buying, although the spread of the Delta coronavirus variant in the US may delay the decision. That would be a dovish twist that markets won´t like.

EUR/USD short-term technical outlook

The EUR/USD pair trades at daily lows and is neutral-to-bearish in the near-term. The 4-hour chart shows that it has fallen below its 100 and 20 SMAs, with the latter maintaining its bullish slope. Technical indicators have turned sharply lower, but are currently around their midlines, unable to confirm further declines ahead.  The key support level to watch is 1.1750 as the pair bottomed around the area multiple times this month. Bulls could have better chances on an advance beyond the weekly high at 1.1840.

Support levels: 1.1750 1.1720  1.1680

Resistance levels: 1.1840 1.1885 1.1920

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