EUR/USD Forecast: Speculative interest on hold ahead of the Federal Reserve's decision

EUR/USD Current Price: 1.0693

• The Federal Reserve will announce its monetary policy decision alongside fresh economic projections.
• The German Producer Price Index slid 12.6% YoY in August rose 0.3% in the month.
• EUR/USD consolidates around 1.0700 awaits Fed's decision for direction.

The US Dollar remains under modest selling pressure across the FX board, with EUR/USD hovering around the 1.0700 threshold ahead of the United States (US) opening. The American session will feature the Federal Reserve (Fed) monetary policy decision, including fresh Economic Projections.

Financial markets head into the event with moderated optimism, triggered by the United Kingdom's (UK) softer-than-anticipated inflation figures. The Consumer Price Index (CPI) rose 0.3% MoM in August, vs expectations of a 0.7% advance. The annual reading printed at 6.7%, easing from the previous 6.8% and below the 7.1% anticipated. The British Pound fell with the news as the odds for additional rate hikes in the country decreased sharply, but at the same time, the headlines boosted the sentiment.

Meanwhile, Germany published the August Producer Price Index (PPI), which increased 0.3% in the month but slid 12.6% compared to a year earlier. The US will not release relevant macroeconomic figures before the Fed's announcement.

Speculative interest anticipates an on-hold rate decision and little changes to the dot-plot. Still, the latter will set the tone alongside Chair Jerome Powell's words. Since market participants are betting on the end of the tightening cycle, they will seek confirmation of such a bet alongside clues on possible rate cuts in 2024.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows that the bullish potential remains limited. The pair keeps developing well below a bearish 20 Simple Moving Average (SMA), which extended its slide below the longer ones. At the same time, technical indicators advance with uneven strength but develop well below their midlines.

EUR/USD is neutral-to-bullish in the near term. The 4-hour chart shows a mildly bullish 20 SMA continues to provide support around 1.0675, while the longer moving averages head south far above the current level. Finally, technical indicators stand right above their midlines without clear directional strength.

 Support levels: 1.0675 1.0630 1.0590

Resistance levels: 1.0720 1.0765 1.0800

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