EUR/USD Daily Forecast – Euro Returns to 200 Week Moving Average Ahead of Fed

Buyers swooped in on a dip to 1.1250 in EUR/USD yesterday, leading to a rally back towards last week’s highs. The pair is seen once again attacking its 200-week moving average ahead of the Fed decision which is expected to be a market mover.

Over the past 12 sessions, EUR/USD has only posted one day in the red and has advanced about 4.5%. The pair has been aided by a weaker dollar as the greenback is the weakest major currency on the day, week, and month thus far.

The near-term fate of the dollar will largely depend on the outcome of today’s Fed decision. The central bank has acted swiftly and powerfully in responding to the Coronavirus crises which has underpinned a move to fresh record highs in the Nasdaq 100 and weighed on the dollar.

The question at this point is whether the Fed will pivot to a slightly less dovish stance after Friday’s US jobs report surprised economists with a gain in new jobs in May and a much smaller decline in unemployment than expected.

Ahead of the Fed meeting, the latest consumer price index figures will be released out of the US. The index declined 0.8% in April which marked it’s second consecutive negative reading.

Technical Analysis

The dollar is oversold and several major currency pairs have reached interesting technical levels. At the same time, EUR/USD has not shown any technical indications of turning lower at this point.

The 200-week moving average falls at 1.1332 although the importance lies in where the pair closes in relation to it by the end of the week. The same indicator held the pair lower on a rally in March.

For the session ahead, the 1.1400 handle stands out as a major hurdle. The pair has not been able to cross it on a daily close basis in over a year. A bullish break would open up the path for a move to the March high near 1.1500.

On the other hand, if the Fed triggers a dollar recovery, support is seen at 1.1287 as the level held the pair higher late last week on a daily chart.

Bottom Line

• The markets await the latest Fed decision. Policymakers may take a less dovish stance after the latest US jobs report was much better than expected.
• Several major currency pairs are facing technical resistance ahead of the Fed decision and are overbought although there have not been any reversal signs at this point.

For a look at all of today’s economic events, check out our economic calendar.