EUR/USD Daily Forecast – Euro Continues to Consolidate at Major Support

The Markets Await the Fed Meeting

EUR/USD bears don’t seem to want to drive the pair below support ahead of the big Fed meeting on Wednesday. The currency pair trades near support that held it higher in April and in May, and a break would have it trading at a fresh yearly low.

Tomorrow’s risk event did not stop Sterling traders as GBP/USD has plummeted in the early week. Just ahead of the European session on Tuesday, the pair neared the 1.2100 handle for a loss of about 2% in the week thus far.

Economic data ahead Wednesday’s Fed meeting is not likely to trigger much volatility in EUR/USD. Data out of France today was softer than expected. Second-quarter GDP growth rose by 0.2% missing the analyst estimate for a rise of 0.3%. Consumer spending declined 0.1% versus an estimate for a rise of 0.2%. There was also a downward revision for the prior month.

US Inflation data will be released in the North American session today. Although the release of the PCE price index hardly moves the markets, it’s worth keeping a close eye on the figure. One of the main reasons the Fed is looking to ease policy is because of subdued inflation. The PCE index should reveal if that remains the case.

Technical Analysis

EUR/USD is catching a bid in early European trading and looks like it is trying to break higher. A push above 1.1150 would break the pair out of the early week range which could trigger a broader recovery.

There is a horizontal level at 1.1188 that held the pair lower following the ECB meeting last week. I think this level remains in play with further resistance from the psychological 1.1200 handle.

There’s an even bigger resistance area 1.1240 as the 50 and 100-day moving averages have converged to the level. However, based on daily ranges, it does not seem likely that the pair will get there ahead of the Fed meeting.

To the downside, the level I have marked off is at 1.1118. So far this support level has held the downside. I am speculating that it will continue to do so on dips into Wednesday’s Fed meeting.

Bottom Line

• The economic calendar is relatively light into Wednesday’s Fed meeting.
• EUR/USD has held above major support found near the 1.1100 handle.
• The first level of upside resistance comes in at 1.1188.