EUR/USD hits weekly highs near 1.1450 ahead of Fed’s decision

  • EUR/USD extends gains and reaches the highest level since December 10. 
  • While the US dollar is moving mixed across the board, the euro remains strong on the back of the Italian budget agreement. 

The EUR/USD pair rose further and climbed to 1.1438, hitting a fresh weekly high. It is trading near the top with the bullish tone intact but still under the key resistance seen around 1.1445/50. 

The move to the upside took place as market participants await the outcome of the 2-day FOMC meeting. A rate hike is priced in, but lately, speculations about a “dovish” tone from the Fed weakened the demand for the US dollar. The statement will be released at 19:00 GMT. 

Analysts at ING, also expect a rate hike today and they point out the economy is booming, inflation is at or above the 2% target and the jobs market is finally generating wage pressures. However, they warn that the outlook for policy in 2019 is more uncertain. “Back in September the Federal Reserve ‘dot diagram’, which shows the individual predictions of FOMC members, pointed to a median expectation of three 25bp rate rises next year with a further 25bp hike in 2020. Market participants are increasingly sceptical of this with Fed funds futures contracts no longer even fully pricing in one hike in 2019.”

The euro is among the top performers today, supported by the possible agreement between the Italian government and the European Commission that triggered a rally in Italian bonds. While EUR/USD is up almost more than 50 pips, EUR/CHF trades at 2-week highs near 1.1350 and EUR/GBP above 0.9030 at the highest since December 12. 

EUR/USD Levels to watch 

To the upside, the critical resistance level is seen at 1.1445/50, followed by 1.1470/75 (Nov 20 high) and 1.1495/1.1500 (Nov 7 high). On the flip side, support might now be seen at 1.1400, 1.1355/60 (Dec 17 high) and 1.1330 (Dec 13 low). 

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