The EUR/USD pair edged higher on Tuesday, gaining 0.2% as it continued testing the 1.0950 region. The Euro reached a fresh 23-month high, driven by a broader risk-on sentiment in the market ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday.
Traders are also eyeing the final European Harmonized Index of Consumer Prices (HICP) figures, set for release on Wednesday. However, no significant revisions are expected from the preliminary data. Additionally, European Central Bank (ECB) President Christine Lagarde is scheduled to speak on Thursday as EU leaders convene for a summit, potentially offering further insights into the ECB’s monetary stance.
Fed’s Policy Outlook in Focus
The Federal Reserve is widely expected to hold interest rates steady in its announcement on Wednesday. According to the CME FedWatch Tool, markets anticipate the Fed will maintain its current rate stance for the next two meetings, with a possible quarter-point rate cut projected for the Federal Open Market Committee (FOMC) meeting in June. However, the FOMC’s updated interest rate forecasts could shift expectations if policymakers signal a stance that diverges from market predictions.
Technical Outlook: Consolidation Likely Before Next Move
From a technical perspective, the Stochastic Oscillator remains in overbought territory above 80.00 but is flattening, indicating a slowdown in bullish momentum. Similarly, the Moving Average Convergence Divergence (MACD) shows flat green bars, suggesting a lack of strong trend conviction. These factors point to a potential consolidation phase before the pair makes a decisive move.
Key resistance is seen at the 1.1000 level, which has historically acted as a significant barrier. On the downside, initial support lies around 1.0850, with stronger support near the 20-day moving average at 1.0800. A drop below these levels could trigger a corrective pullback, while sustained trading above 1.0900 would reinforce the bullish outlook for the Euro.
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