EUR/USD rebounds and approaches 1.1000

The EUR/USD found support above 1.0930 and climbed back toward the daily high it hit on European hours at 1.0989, boosted by a stronger euro and a mixed US dollar.

Conversations and the Fed

The key driver of price action continues to be the war in Ukraine. Volatility remains elevated, even among currencies. The economic calendar shows the US Producer Price Index due on Tuesday and on Wednesday, the critical event of the week: the Fed’s decision.

The FOMC is expected to hike the fed funds rate by 25 bps on Wednesday. If the Fed delivers as expected, it will be the first time since 2018, and attention would turn to signs about the future path of monetary policy. Analysts at Rabobank, see four consecutive rate hikes of 25 bps each in March, May, June and July. “We also expect that the impact of the Russian invasion of Ukraine and subsequent sanctions on global economic activity will be felt in the US more broadly in the second half of the year, inducing the FOMC to take a pause for the remainder of the year to make sure that a recession is avoided, before resuming the hiking cycle”.

Ahead of the FOMC meeting and also boosted by risk aversion, US yields are trading at monthly/yearly highs, supporting the greenback. In Europe, yields are also higher, keeping the EUR/USD far from the recent bottom.

Looking at 1.1000

The EUR/USD is holding onto daily gains, facing resistance at 1.1000, not only a round number, but also where the 20-Simple Moving Average stands in four-hour charts. A recovery above should add support to the euro, exposing the next resistance at 1.1035. Above the following resistance levels might be seen at 1.1070 and 1.1095.

If the pair fails to recover 1.1000 over the next hours, a potential decline back to 1.0935 should be considered. The area also contains the 20-hour SMA. Below attention would turn to 1.0895/1.0900, below the bearish pressure should intensify.

Technical levels