EUR/USD Forecast: struggles for direction as focus shifts to FOMC decision

The EUR/USD pair continued with its struggle to sustain/build on the momentum beyond the 1.1800 handle and finally lost some ground on Tuesday. A late pickup in the US Dollar demand, during the New-York trading session, was seen as one of the key factors exerting some downward pressure on the major. The pair, however, had a rather muted reaction to the latest US consumer inflation figures and the denuclearization deal signed by Trump and Kim in Singapore.

The pair traded in a sideways manner during the Asian session on Wednesday as market participants turned their focus to the outcome of a highly anticipated two-day FOMC policy meeting. The US central bank is scheduled to announce its decision later during in the day and is widely expected to hike interest rates. The key focus would on updated economic projection, especially the so-called 'dot-plot'. Any hints of more than 3 rate hikes already priced in the market should be positive for the greenback. 

Meanwhile, investors are unlikely to place any aggressive bets and would prefer to wait on the sidelines ahead of Thursday's ECB decision, where the central bank is expected to outline its plan for eventually ending the massive bond purchase program. 

From a technical perspective, the pair’s recent recovery from over 10-month lows stalled near 61.8% Fibonacci retracement level of the 1.1996-1.1510 recent downfall. Hence, it would be prudent to wait for a convincing break through the mentioned barrier before confirming that the pair might have bottomed out in the near-term. 

Immediate resistance is pegged near the 1.1770 horizontal zone, above which the pair is likely to make a fresh attempt to clear the said hurdle near the 1.1800 handle. A follow-through momentum has the potential to continue lifting the pair even beyond 1.1840 intermediate towards reclaiming the 1.1900 round figure mark.

On the flip side, the 1.1720 level might continue to protect the immediate downside, which if broken might turn the pair vulnerable to slide back below the 1.1700 handle (38.2% Fibonacci retracement level) and head towards testing its next support near the 1.1655 region.