EUR/USD under pressure below 1.1100 ahead of US CPI, Fed

EUR/USD is seeing a typical pre-Fed decision caution trading so far this Wednesday, as the bulls take a back seat amid broad-based US dollar strength.  

Focus on Fed’s dot plot update, Powell

The greenback keeps the upper edge across its main peers on the Fed day, finding some support from small gains in Treasury yields and looming US tariffs hike uncertainty. Overnight reports cited that the US is considering delaying the Dec 15 tariffs but President Trump was undecided yet.

Markets prefer to hold the US currency in times of uncertainty and an anti-risk trading environment. The USD index consolidates the overnight bounce around 97.50, up +0.12% on the day.

Adding to the pressure on the pair, the US dollar continues to benefit from the monetary policy divergence, with the Federal Reserve (Fed) dot plot revision to show that the Fed is likely to keep rates on-hold through 2020.

Meanwhile, the European Central Bank (ECB) President Lagarde, at her debut rate-setting meeting this Thursday, is expected to back ECB’s commitment to the recent stimulus package that included a rate cut and the restarting of quantitative easing (QE) program.

Looking ahead, the major will continue to trade in a sideways manner, tracking the US dollar price-action, in absence of any macro news from the European calendar. Further, the US Consumer Price Index (CPI) data, due at 1330 GMT, will offer some trading impetus ahead of the key Fed event, due at 1900 GMT.

The Fed is unanimously expected to make no changes to its monetary policy settings, keeping interest rates steady at 1.5-1.75%. However, Fed Chair Powell’s comments and economic projections will hog the limelight.

EUR/USD Technical levels to watch