EUR/USD and Sub-$1.10 Hinged on a Fed Chair Powell Curveball

Highlights

• It is a quiet start to the Wednesday session for the EUR/USD, with no euro area economic indicators for investors to consider.
• However, the Fed interest rate decision and the Fed Chair Powell press conference will move the dial.
• The nearer-term technical indicators are bearish, with the bears eying sub-$1.10.

On Tuesday, the EUR/USD fell by 0.14% to wrap up the day at $1.10482. Disappointing German business sentiment figures and a jump in US confidence weighed.

However, it is a quiet European session today, with no euro area economic indicators for investors to consider. The lack of stats will leave ECB monetary policy in focus. While the markets are betting on a 25-basis point ECB rate hike on Thursday, economic indicators suggest the need for the ECB to hit the brakes.

However, until now, the ECB has remained resolute in taming inflation. No ECB members are on the calendar to speak today, leaving commentary with the media to move the dial.

The US Session

US housing sector data should have a muted impact on the EUR/USD, with the Fed interest rate decision and press conference in focus.

A 25-basis point interest rate hike would leave the FOMC Statement and press conference to move the dial. With the softer US CPI Report wiping out bets on a September rate hike, a hawkish 25-basis point interest rate hike would catch the markets by surprise.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD hover below the upper level of the $1.1060 – $1.1015 support band. Support at the lower level of the support band limited the downside on Tuesday. A EUR/USD move through the upper level ($1.1060) would give the bulls a run at $1.11 and the $1.1180 – $1.1221 resistance band.

However, a fall through the lower level of the $1.1060 – $1.1015 support band would bring the 50-day EMA ($1.09691) into view.

Looking at the EMAs, the EUR/USD sat above the 50-day ($1.09691) and 200-day ($1.07754) EMAs, signaling bullish momentum over the near and longer term.

Notably, the 50-day EMA pulled further away from the 200-day EMA, affirming the near-term bullish trend.

Looking at the 14-Daily RSI, the 51.69 reading sent bullish price signals. The RSI aligned with the EMAs, supporting a EUR/USD run at the $1.1180 – $1.1221 resistance band.

Price action today hinges on the Fed interest rate decision and press conference.

4-Hourly Chart

Looking at the 4-Hourly Chart, the EUR/USD sits below the upper level of the $1.1060 – $1.1015 support band. However, the EUR/USD remained below the 50-day EMA ($1.11118) while holding above the 200-day EMA ($1.10070), sending bearish near-term but bullish longer-term price signals.

Significantly, the 50-day EMA narrowed on the 200-day EMA, signaling a fall through the $1.1060 – $1.1015 support band and the 200-day EMA ($1.10070). However, a move through the upper level of the $1.1060 – $1.1015 support band would give the bulls a run at the 50-day EMA ($1.11118) and the $1.1180 – $1.1221 resistance band.

The 14-4H RSI at 28.16 shows the EUR/USD in oversold territory. Significantly, the RSI aligns with the 50-day EMA, supporting a run at the lower level of the $1.1060 – $1.1015 support band and the 200-day EMA ($1.10070).

Price action today hinges on the Fed interest rate decision and press conference.