EUR/USD gains ground ahead of Federal Reserve decision

EUR/USD Current Price: 1.1120

• The looming Federal Reserve announcement undermines demand for the US dollar.
• Eurozone and US data came in better than expected.
• EUR/USD is technically bullish and could reach the 1.1150 region in the near term.

EUR/USD rose to 1.1132 on Monday, the highest level in over a week. The pair is trading close amid weakness in the US dollar, fueled by speculation that the Federal Reserve (Fed) will cut interest rates when it meets this week. The Fed is scheduled to announce its monetary policy decision next Wednesday, and market participants had long ago pegged a cut of at least 25 basis points (bps). There is still a slight chance that the central bank will opt for a more aggressive 50bps rate cut, a decision that could further undermine demand for the USD.

Meanwhile, a firmer Japanese yen (JPY) weighed on the greenback earlier in the day. Central bank imbalances drove USD/JPY to 139.54, a new multi-month low, as the Bank of Japan (BoJ), which also meets this week, is expected to move in the opposite direction of the Fed and raise rates interests.

On the data front, the Eurozone released July’s Trade Balance, which posted a seasonally adjusted surplus of €15.5 billion, down from June’s €17.0 billion. As for the United States (US), the country released the NY Empire State Manufacturing Index, which improved sharply to 11.5 in September from -4.7 in the previous month. As a result, the USD remained under selling pressure. There are no other relevant figures scheduled for the rest of the day.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is bullish. The daily chart shows that it is near the intraday high after retracing above a simple moving average (SMA) of 20. The latter provides short-term support at the 1.0990 price area. At the same time, the technical indicators aim north, albeit with uneven strength, and the Momentum indicator is still below the 100 line, somehow limiting the upside potential. Finally, the 100 SMA is grinding higher above a flat 200 SMA, suggesting persistent buying interest.

In the short term, and according to the 4-hour chart, bullish momentum has eased, although risk remains tilted to the upside. EUR/USD is developing above all its moving averages, only 20 SMA is heading north, trapped between 100 and 200 SMA. Technical indicators, meanwhile, have lost their upside after hitting overbought levels, now hovering aimlessly near their intraday highs.

Support levels: 1.0990 1.0950 1.0910

Resistance levels: 1.1050 1.1090 1.1140