EUR/USD Daily Price Forecast – EUR/USD Softer Ahead of US Fed Policy Meet Update

The EUR/USD posted a two-sided trade on Tuesday under relatively thin trading conditions. The Euro tried to breakout to the upside early but didn’t have enough buying volume to succeed. It seemed traders weren’t too committed to either direction due to Wednesday’s U.S. Federal Reserve announcement. In other news, data showed U.S. consumer spending increased solidly in June, while inflation rose moderately. Other data showed employers boosting benefits for workers in the second quarter, but wage growth slowed. EUR/USD reversed sharply lower from resistance in the North American session on Tuesday, giving back early day gains to trade relatively unchanged at the European close. The currency pair continues to hold within a broader range and closed flat for the month i.e., the open and close for the pair was nearly same. Across the month of July 18, the pair was trapped in broader price range of 1.5739 to 1.17895 and is currently trading within an narrow price band of 1.16178 to 1.17502 as the pair seems to lack the driving force to make a breakout in either direction in both recent past and near future.

FOMC Statement in Focus Amid Renewed Trade War Fears

Looking at today’s Fed meet, Federal Reserve (Fed) is expected to keep interest rates unchanged at 1.75-2.00% today, having lifted borrowing costs by 25 basis points in June. The absence of a post-meeting press conference and new economic projections also makes the July meeting a less exciting event. Nevertheless, investors will scan the policy statement for clues on whether the US President Trump’s criticism of rate hikes is forcing the Fed to adopt a more tempered tone. The EUR/USD could rise if the Fed tempers hawkish tone. On the other hand, the pair may fall back to the key support of 20-month MA, currently located at 1.1623 if the central bank downplays trade war fears and retains hawkish rhetoric.

The core PCE index, the Fed’s preferred inflation measure, rose 1.9% from a year earlier for a third straight month, near the Fed’s two-percent inflation target. the tariff tantrum ramped up a bit since the last FOMC confab, However the core of the Fed thus far seems unconvinced that this warrants any material shift in the outlook. This has led many analysts to opinion that the Fed is poised to raise the funds rate by additional 50 basis points this year. On a separate note, while trade war fears between Europe and US seems to have lowered, The U.S. dollar edged up on the Yuan and growth-leveraged currencies on Wednesday after a source said the White House was about to propose higher tariffs on $200 billion in Chinese imports, perhaps sparking a new round of trade hostilities. Expected support and resistance for the pair are at 1.1620 / 1.1508 and 1.1747 / 1.1791 respectively.