EUR/USD: Focus on Fed's forward guidance

  • The EUR/USD is sidelined around 200-hour MA.
  • The demand for EUR puts is on the rise ahead of the Fed.
  • The focus is on the Fed's forward guidance as rate hike has been priced-in.

The EUR/USD traded in a sideways manner in Asia around the 200-hour moving average (MA) of 1.1746 as investors turned cautious ahead of the all-important FOMC rate decision.

The market widely expects the Fed to hike rates by 25 basis points and the rate hike has been priced-in. So the focus will on Fed's forward guidance.

The US dollar may pick up a strong bid, sending EUR/USD well below 1.17 if the Fed signals faster rate hikes and pushes up terminal rate forecasts. However, if Fed delivers a dovish hike, then the EUR/USD could revisit recent high of 1.1840.

Options data indicate the investors could be bracing for a hawkish forward guidance. The one-month 25 delta risk reversals hit 12-day low today, signaling rising demand or rising implied volatility premium for the EUR puts.

EUR/USD Technical Levels

The EUR/USD has made its way below short-term consolidation triangle, as seen in the 4-hour chart, signaling the bears are gaining the upper hand. The chart also shows the accelerated trendline has been breached.

Resistance: 1.1769 (4H 10MA), 1.1822 (bearish/falling 4H 200MA), 1.1840 (recent high).

Support: 1.1715 (4H 100MA), 1.1652 (support on 4H chart), 1.1510 (recent low).

4-hour chart

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