EUR/USD fails to hold above 1.18, sticks to modest daily gains

After recording its second straight negative weekly close on Friday, the EUR/USD is staging a technical recovery on Monday. Following an attempt to break above the 1.18 handle, however, the pair lost its bullish momentum and was last seen trading at 1.1795, up 0.18% on the day.

The pair's upsurge today seems to be a product of broad-based euro strength. In fact, the Euro Index is up 0.25% at 94.90 at the moment. The EUR/GBP's 40-pip advance is also providing an additional boost to the positively-correlated EUR/USD pair. Meanwhile, the greenback couldn't preserve its bullish momentum from last week and is recording a corrective slide below the 94 mark on Monday amid a lack of fresh fundamental drivers that could keep the demand for the buck high. 

ECB and Fed to announce their policy outlook 

Later this week, both the Fed and the ECB will be announcing their monetary policy decisions. Although both banks are expected keep their policy rates unchanged, their 2018 outlook is likely to trigger significant reactions from the markets. 

The Fed is going to publish its updated economic projections and more importantly, and more importantly, rate hike expectations of every individual FOMC member presented in the dot plot. The most recent macroeconomic data from the United States had been supportive of three rate hikes next year with the labor market tightening and the consumer inflation rising at an anticipated pace. A hawkish tone from the Fed could help the buck gain strength against its peers. On the other hand, the ECB's inflation outlook will be a significant catalyst for the shared currency. 

"The most interesting bit of the ECB meeting will probably be the presentation of the latest ECB staff projections. With some upward revision for Eurozone growth for this year and next, the ECB should join the growing choir of Eurozone optimists. Even more important for the future path of monetary policy, however, will be the ECB’s inflation forecasts for 2019 and 2020,” ING analysts explained in a recent report.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "the potential of a bearish move is limited as long as the price holds above the 1.1750/60 price zone, although a break below it should lead to a new leg south toward the 1.1710/20 price zone. Beyond 1.1800, on the other hand, the pair has scope to extend its advance up to the next Fibonacci resistance at 1.1835, but gains beyond this last are unlikely for today."