EUR/USD Price Forecast: Bears pause ahead of Federal Reserve’s announcement

EUR/USD Current price: 1.0402

• The Federal Reserve is set to keep interest rates on hold, focus on Powell.
• Financial markets are in a better mood after the AI-inspired sell-off.
• EUR/USD could extend its decline towards 1.0300 in the near term.

The EUR/USD pair hovers around 1.0400 early in the American session Wednesday, with the US Dollar (USD) retaining its firm tone yet moving cautiously ahead of the Federal Reserve (Fed) monetary policy announcement.

The United States (US) central bank is widely anticipated to keep the benchmark interest rate unchanged at 4.25% - 4.50%, after trimming it by 25 basis points (bps) in December. Back then, policymakers cooled down expectations for multiple interest rate cuts through 2025 amid increased political uncertainty. The focus will then be on Chairman Jerome Powell’s press conference and any hint he may provide on future actions. Ahead of the event and according to the December dot plot, the Fed is set to cut rates two times this year.

Other than that, financial markets are a bit more optimistic. Stock markets keep trimming AI-inspired losses, with the tech sector leading the recovery. Wall Street’s futures are up, yet again, movements are modest ahead of the Fed.

The Eurozone macroeconomic calendar included the February GfK Consumer Confidence Survey, which printed at -22.4, worse than the -21.4 posted in January. The Eurozone released M3 Money Supply, which rose by 3.5% in the year to December, down from the previous 3.8%. The US published MBA Mortgage Applications for the week ended January 24, which declined 2%. Finally, the country will release the December Goods and Services Trade Balance around Wall Street’s opening.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows bears retain control. The pair extended its weekly decline to 1.0392, trading nearby. The same chart shows that the 20 Simple Moving Average (SMA) has lost its upward strength and is now acting as dynamic support at around 1.0350. At the same time, the 100 and 200 SMAs gain downward traction well above the current level, while technical indicators extend their slides, although within positive levels.

The bearish case is clearer in the near term and according to the 4-hour chart. The 20 SMA gains downward traction above the current level, while EUR/USD approaches a bearish 200 SMA, the latter at around 1.0390. Finally, technical indicators remain within negative territory, in line with the prevalent selling pressure, yet lose their downward strength. Still, the risk skews to the downside, with a clear break below the 1.0390 support hinting at a slide towards the 1.0300 region. 

Support levels: 1.0390 1.0350 1.0310

Resistance levels: 1.0440 1.0485 1.0520