Attention grows ahead of Federal Reserve announcement

EUR/USD Current Price: 1.1124

• Investors remain focused on central banks, with the Fed scheduled for Wednesday.
• Germany’s ZEW poll delivered a negative surprise in September.
• EUR/USD is retreating from recent highs, but bearish potential appears limited.

The EUR/USD pair remains positive on Tuesday, currently retreating from an intraday high of 1.1145 ahead of the United States (US) open. Financial markets are trading cautiously as the US Federal Reserve’s (Fed) monetary policy decision looms. The Fed is expected to cut interest rates on Wednesday after pushing them to record highs in the wake of the pandemic. As a result, the US dollar remains under pressure across the currency world.

Meanwhile, the macroeconomic calendar had some relevant numbers to offer. In the Eurozone, Germany released its September ZEW Economic Sentiment Survey, which showed a sharp, unexpected contraction. Germany’s index fell to 3.6, while the EU’s fell to 9.3, much worse than the expected 17.1 and 17.6. Furthermore, Germany’s current situation assessment deteriorated to -84.5 from -77.3 in August.

The US released August retail sales, which rose 0.1%, compared to a 1.1% increase in July. The reading, however, beat expectations for a 0.2 percent decline. The greenback gathered short-term momentum on the news, pushing EUR/USD towards the current 1.1120 price area. The country will later reveal August’s industrial production and capacity utilization for the same month, as well as July’s business inventories.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair offers a neutral bias to the upside. On the daily chart, the pair is developing above all moving averages, although the 20 Simple Moving Average has lost its upside and is back at 1.1090, providing short-term support. However, the longer moving averages are well below the shorter and gaining bullish traction, limiting the pair’s bearish potential. Technical indicators, meanwhile, lack directional strength. The Momentum indicator is stuck around its midline, while the Relative Strength Index (RSI) indicator is hovering around 58, suggesting limited selling interest.

In the short term, and according to the 4-hour chart, EUR/USD could extend its corrective slide. Technical indicators continue to pull back from recent highs, maintaining firm downslopes, albeit at positive levels. At the same time, a bullish 20 SMA breaks above a flat 100 SMA, while the 200 SMA gains upward traction below the shorts, usually a sign of bullish dominance.

Support levels: 1.0990 1.0950 1.0910

Resistance levels: 1.1050 1.1090 1.1140