The EUR/USD pair has managed to extend its steady rise and touched 1-1/2 week high level of 1.2020 on Wednesday. Tuesday's upbeat German ZEW survey was seen lending support to the shared currency, while a modest US Dollar weakness further collaborated to the pair's move back above the key 1.20 psychological mark.
The up-move, however, seemed lacking strong conviction amid signs of caution ahead of the much awaited FOMC decision. Investors would be looking for clues over the central bank's monetary policy outlook, which would eventually drive the greenback in the near-term and provide some fresh directional impetus for the major.
There aren't any macroeconomic data points due for release from the Euro-zone and hence, the USD price dynamics would remain an exclusive driver of the pair's momentum on Wednesday.
Looking at the technical setup, the pair has been oscillating within a broader trading band since late August, forming a rectangle on daily chart. Currently hovering around the 1.20 handle, the top end of the range near mid-1.2000s might continue to restrict immediate upside. A clear break through the mentioned hurdle now seems to pave way for resumption of the pair’s prior appreciating move and lift it back to yearly tops resistance just ahead of the 1.2100 round figure mark. The bullish trajectory could further get extended towards a short-term ascending trend-channel resistance, currently near the 1.2200 handle.
Alternatively, a pull-back from the trading range resistance, leading to a subsequent break below mid-1.1900s, would turn the pair vulnerable to break below the 1.1900 handle and test the ascending trend-channel support near the 1.1880 region. A follow through weakness might continue to find some support near 1.1835-25 zone, which if broken would confirm a bearish break down and continue dragging the pair towards its next major support near 1.1720 horizontal level.
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