Bulls waiting for the Fed

EUR/USD Current Price: 1.1120

• Market participants await the Federal Reserve’s monetary policy announcement.
• The Eurozone confirmed August’s harmonized consumer price index at 2.2% y/y.
• EUR/USD loses short-term momentum, but bulls remain in control.

EUR/USD is hovering around 1.1120 ahead of the Wall Street open, little changed daily. The US Dollar is generally weak ahead of the Federal Reserve’s (Fed) monetary policy announcement later in the day, but the Euro cannot take advantage of it. The Fed is expected to cut interest rates for the first time in four years, with markets anticipating a 25 basis point (bps) cut. However, a cut of more than 50 bps is not off the table.

Even more, the Fed will present a new Summary of Economic Projections (SEP) or dot chart, which may add to the expected spike in volatility. The document could provide clues as to what Fed officials plan to do in the coming months and whether they will take a more conservative or hawkish stance.

Meanwhile, the eurozone confirmed that the Harmonized Index of Consumer Prices (HICP) rose by 2.2% in the year to August. The monthly reading was revised down to 0.1% from the flash estimate of 0.2%. Ahead of the Fed’s decision, the United States (US) released figures on building permits and housing starts for August, up 4.9% and 9.6%, respectively.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is bullish. On the daily chart, the pair is comfortably above a 20 simple moving average (SMA) at around 1.1090, while the 100 SMA continues to eat higher above the 200 SMA, both well below the shortest. At the same time, the Momentum indicator crossed its median line into positive territory, maintaining a firm upward slope. Finally, the Relative Strength Index (RSI) indicator is consolidating around 58 with no signs of upside exhaustion.

EUR/USD is losing its bullish balance in the short term. The 4-hour chart shows that the technical indicators are heading lower, although still above their median line. At the same time, the price is pushing a slightly bullish 20 SMA, with a break below it favoring a slide. However, future direction will depend on the Fed’s announcement and how financial markets understand the accompanying documents.

Support levels: 1.1090 1.1050 1.1010

Resistance levels: 1.1160 1.1200 1.1250