EUR/USD: Range-play to extend ahead of US CPI, FOMC

The EUR/USD pair stalled its overnight recovery in Asia, now consolidating near mid-1.17s, awaiting fresh directional impetus from the upcoming US CPI numbers and outcome of the final Fed meeting due later on Wednesday. 

The corrective slide in the US dollar picked-up pace, prompting the EUR/USD pair to stage a solid comeback from a drop to three-week lows of 1.1718. The USD bulls moved past upbeat US PPI—led spike in the greenback and turned defensive on the FOMC day.

However, over the last hours, the bears have taken a breather, as the US politics is back in play, with the Alabama Senate voting underway while markets also look forward to the US President Trump’s speech on the tax reform plan at the Department of the Treasury, in Washington, due later today.

In the day ahead, the focus remains on the US-German yield differential ahead of the key inflation data alongside the divergent monetary policy outlooks between the Fed and ECB, as the Fed is widely expected to raise the rates by 25 bps today.

Despite a rate hike already priced-in by the markets, a ‘Sell the fact’ trading in the greenback cannot be ruled out, as the Fed’s economic projections and language of the statement hold the key for the next direction.

EUR/USD Preferred Strategy

According to Valeria Bednarik, Chief Analyst at FXStreet: “Technical readings in the 4 hours chart support additional declines ahead, as the price has settled below its 200 SMA, while early intraday advances were contained by a bearish 20 SMA, as technical indicators maintain their strong downward slopes within the negative territory. Below the mentioned relevant low, the pair has scope to extend its decline toward 1.1660, a strong static support level, while loses beyond this last, will be likely only on a strongly positive surprise from the Fed, later this Wednesday. Support levels: 1.1710 1.1690 1.1660. Resistance levels: 1.1750 1.1800 1.1835.”