EUR/USD Forecast: Post-FOMC slide sets the stage for further near-term downfall

• Not so dovish Fed prompted some USD short-covering move and exerted pressure on EUR/USD.
• A turnaround in the global risk sentiment further benefitted the greenback’s safe-haven status.
• Investors now eye final Eurozone CPI and second-tier US economic releases for some impetus.

The US dollar witnessed some aggressive short-covering move after the Fed gave no indication of additional stimulus to shore up a battered US economy. As was widely expected, the FOMC kept federal funds rate unchanged at 0-0.25% and indicated that the benchmark rate will stay close to zero at least through 2023. The Fed also released its new economic projections and now expects economic growth to improve from the coronavirus-induced drop they projected in June. The US central bank projected a much shallower contraction in 2020 and the unemployment rate forecasts were also revised lower through the horizon.

The greenback strengthened across the board in reaction to the Fed's upbeat assessment of the economic recovery. Adding to this, a turnaround in the equity markets further drove some haven flows towards the USD. The pair retreated nearly 100 pips from daily swing highs and witnessed some follow-through selling during the Asian session on Thursday amid softer global risk sentiment. The downward momentum dragged the pair below an important horizontal support near mid-1.1700s, to the lowest level since August 12.

Market participants now look forward to the final Eurozone CPI figures for some impetus. The US economic docket highlights the release of Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. This, along with housing market data – Building Permits and Housing Starts – might influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, a break below the 1.1750 support area might have already set the stage for a further near-term depreciating move. Bears, however, took some breather near 50-day SMA, below which the pair seems all set to accelerate the slide towards August monthly swing lows, around the 1.1700-1.1695 region. The latter coincides with the 38.2% Fibonacci level of the 1.1168-1.2011 strong positive move. A convincing break below should pave the way for an extension of the ongoing corrective slide and drag the pair further towards the 1.1600 round-figure mark (50% Fibo. level)

On the flip side, any meaningful recovery attempted might now confront stiff resistance near the 1.1800 mark, which is closely followed by 23.6% Fibo. level, around the 1.1820-25 region. The mentioned barrier is likely to cap the upside, through a sustained strength beyond might trigger some near-term short-covering move. That said, any subsequent move up seems more likely to remain capped near the 1.1900 level.