Market Update: EUR/USD and Federal Reserve Insights
During European trading on Tuesday, EUR/USD dipped slightly to around 1.1580. Other major currency pairs also fell, reflecting a rise in the US dollar as traders anticipated the Federal Reserve’s monetary policy announcement scheduled for Wednesday.
At this moment, the US Dollar Index (DXY), which gauges the dollar’s strength against six significant currencies, is up 0.1% and hovering around 99.75.
The upcoming Fed policy announcement marks the first under new Chairman Kevin Warsh, which is expected to influence the US dollar significantly. Fed Chair Warsh is likely to adopt a neutral stance regarding future monetary policy, particularly as rising energy prices contribute to inflationary concerns.
According to the CME FedWatch tool, it is anticipated that interest rates will remain steady within the 3.50-3.75% range for the fourth consecutive meeting.
On a different note, the euro has shown some strength, particularly among riskier countries, amid speculation that the European Central Bank (ECB) may tighten financial conditions further.
Martins Kazaks, a member of the ECB Governing Council, mentioned on Monday that the bank “will have to act again if necessary,” although he foresees inflation risks continuing to rise.
EUR/USD Technical Analysis
Currently, EUR/USD is struggling around the 1.1580 mark, lingering just below the 20-period exponential moving average (EMA) of 1.1599 and beneath a downtrend resistance line originating from 1.1849, indicating a moderate bearish sentiment.
Even though the price is above the previous rising support line at 1.1409, the Relative Strength Index (RSI) of about 44 remains below the midpoint, suggesting that any attempts at recovery are somewhat precarious, with sellers still in control.
Looking upward, immediate resistance is near the 20-period EMA at 1.1600, with a more significant downtrend break point around 1.1687 and another hurdle at the initiation of the downtrend at 1.1849. On the downside, initial support appears to be near the prior uptrend break area at 1.1506, and a key low at the start of the trend line at 1.1409, where a decisive break could reinforce the broader bearish trend.
