EUR/USD Forecast: Moves back to familiar trading range ahead of FOMC

The US Dollar drifted lower at the start of a new trading week and assisted the EUR/USD pair to stage a solid rebound from over two-week lows set on Friday. Growing speculations that the Fed is likely to pause its rate hike cycle in 2019, especially after the recent dovish comments by various Fed officials, including Chairman Jerome Powell, turned out to be one of the key factors exerting some fresh downward pressure on the greenback.

The downward momentum accelerated further after the US President Donald Trump, adding to his recent criticism, suggested in a tweet that the Fed should pause at raising rates. The greenback was further pressured by downbeat Empire State manufacturing index, which fell to a 19-month low, and the home builders’ index dropped to its weakest in about 3½-years. 

Broad-based USD weakness pushed the pair beyond mid-1.1300s, erasing a major part of Friday's dismal Euro-zone PMI-led downslide. The uptick, however, seemed to lack any strong follow-through and remained capped through the Asian session on Tuesday as market participants get ready for the latest FOMC monetary policy update, scheduled during the US trading session on Wednesday.

Heading into the key event risk, today's economic docket, featuring the release of German Ifo Business Climate index and the US housing market data, will be looked upon for some short-term trading impetus. 

Looking at the technical picture, the overnight goodish up-move now seems to have faced rejection near an important confluence resistance - comprising of 200-hour SMA and 50% Fibonacci retracement level of last week's sharp decline. A follow-through weakness below 38.2% Fibonacci retracement level support near the 1.1335-30 region, will suggest that the near-term bearish trajectory is far from over and accelerate the slide towards the 1.1300 handle.

Alternatively, a convincing move beyond the mentioned confluence hurdle has the potential to lift the pair further towards 61.8% Fibonacci retracement level resistance near the 1.1375 region en-route its next major barrier near the 1.1400 round figure mark.