After refreshing its weekly high at 1.2006 during the early trading hours of the European session, the EUR/USD pair fell back into the negative territory before the NA session went underway, but gained traction on the mixed-macro data from the United States. As of writing, the pair was trading in a tight range around 1.1980, gaining 0.2% on the day.
A Reuters report on Tuesday, citing unknown ECB sources, claimed that some elements of the decision regarding the QE tapering could be postponed to December and weighed on the shared currency. Furthermore, the report also noted that concerns over the euro's strength were creating uncertainty and division among the Governing Council.
Despite the retreat triggered by this development, the pair didn't have a difficult time recovering its losses as the poor macroeconomic data from the U.S. didn't allow the greenback to gather strength against its competitors. The US Dollar Index, which tested the 92 handle on Monday, is now moving sideways around the 91.70 mark, losing 0.13% on the day.
Ahead of tomorrow's FOMC decisions and the updated economic projections, the pair is likely to remain directionless as investors will look to eliminate the uncertainty regarding another rate hike in December. Valeria Bednarik, Chief Analyst at FXStreet, writes, "unless a surprise rate hike is announced, with doors opened for also a December hike, dollar possible gains won't be sustainable in time. The US administration has hinted that the tax reform will be discussed by the end of September, so a hawkish Fed, plus some positive news on the issue by the end of the month, could be the beginning of the end of dollar's decline, but that's the most it could be said at this point."
Technical outlook
Although the RSI indicator on the daily graph is rising slowly above the 50 mark, the pair is unlikely to make a sharp move in the short-term. The initial support could be seen at 1.1940 (20-DMA) ahead of 1.1845 (Sep. 14 low) and 1.1800 (psychological level). On the flip side, 1.2000 (psychological level) is the first critical hurdle followed by 1.2090 (Sep. 8 high) and 1.2170 (Dec. 31, 2014, high).
Today's data from the U.S.:
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