- The pair extends the rebound to the 1.1360/65 band.
- The greenback remains on the defensive near 96.40.
- Fed expects to leave the Fed Funds target unchanged today.
EUR/USD is now picking up extra pace and is flirting with the key 55-day SMA in the 1.1365 area.
EUR/USD looks to FOMC, Brexit
The pair moves higher and tests the critical barrier at the 1.1365/70 band, coincident with the 55-day/100-day SMAs against the backdrop of the persistent selling pressure in the buck ahead of the FOMC event.
In addition, increasing weakness in the Sterling is helping the pair via the stronger EUR/GBP after UK PM Theresa May officially asked the EU for a short extension of Article 50.
Moving forward, the rally in spot will be put to the test in light of the upcoming FOMC meeting, where the revised ‘dots plot’, Fed’s balance sheet reduction and new projections on growth, inflation and employment will be in the limelight.
What to look for around EUR
Market participants have left behind the recent and renewed dovish stance from the ECB, focusing instead on the broad risk-appetite trends and USD-dynamics as the main drivers of the price action. Looking to the broader picture, the performance of the economy in the region should remain in centre stage along with prospects of re-assessment of the ECB’s monetary policy. In this regard, it is worth mentioning that investors keep pricing in the first rate hike by the central bank at some point in H2 2020. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections, where the focus of attention will be on the potential increase of the populist option among voters.
EUR/USD levels to watch
At the moment, the pair is up 0.11% at 1.1363 and a breakout of 1.1419 (high Feb.14) would target 1.1482 (200-day SMA) en route to 1.1514 (high Jan.31). On the downside, the immediate support aligns at 1.3121 (21-day SMA) seconded by 1.1295 (10-day SMA) and finally 1.1234 (low Feb.15).
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