- The EUR/USD pair defended the 20-month moving average (MA) support in the past three consecutive months.
- The pair may pick up a strong bid if the Fed adopts a cautious tone.
The EUR/USD could be in for a stronger rally to 1.20, having defended the 20-month moving average for the third straight month in July.
The monthly chart shows the currency pair has charted back-to-back doji candles along the 20-month MA support, signaling indecision or bearish exhaustion following a drop from the February high of 1.2556.
Consequently, the common currency looks overdue for a corrective rally. At press time, the EUR/USD is trading at 1.1680.
Focus on the Fed
Federal Reserve (Fed) is expected to keep interest rates unchanged at 1.75-2.00% today, having lifted borrowing costs by 25 basis points in June. The absence of a post-meeting press conference and new economic projections also makes the July meeting a less exciting event.
Nevertheless, investors will scan the policy statement for clues on whether the US President Trump's criticism of rate hikes is forcing the Fed to adopt a more tempered tone.
The EUR/USD could rise if the Fed tempers hawkish tone. On the other hand, the pair may fall back to the key support of 20-month MA, currently located at 1.1623 if the central bank downplays trade war fears and retains hawkish rhetoric.
EUR/USD Technical Levels
Resistance: 1.1747 (previous day's high), 1.1791 (July 6 high), 1.1852 (June 14 high).
Support: 1.1674 (50-day moving average), 1.1620 (lower Bollinger Band as per the daily chart), 1.1508 (June 21 low).
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