EUR/USD Forex Technical Analysis – Steady Ahead of Fed’s Widely Expected Rate Hike

The Euro is edging higher against the U.S. Dollar early Wednesday after posting a minor technical reversal bottom the previous session. Supporting the single-currency is a lift in sentiment due to a pullback in U.S. Treasury yields.

At 04:18 GMT, the EUR/USD is trading 1.0436, up 0.0018 or +0.17%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $96.36, up $0.02 or +0.02%.

Focus Shifts to Fed

All eyes are now on the U.S. Federal Reserve’s monetary policy and interest rate decisions due to be released at 18:00 GMT. As of Tuesday’s close, there is now a nearly 90% expectation for a 75 basis-point rate increase at the conclusion of a two-day meeting on Wednesday, according to Refinitiv’s Fedwatch Tool.

The Fed will also release economic and interest rate forecasts that will provide clues on future rate hikes. The Street is saying the Fed may be considering an additional 75 basis-point hike in July, followed by a 50 basis-point rise in September.

Euro Zone Economic News

Final data from Destatis on Tuesday showed that German consumer price inflation accelerated to a new record high in May, as initially estimated, driven by higher energy prices. Consumer price inflation rose to 7.9 percent in May from 7.4 percent in April. The rate came in line with the flash estimate published on May 30.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, Tuesday’s reversal bottom suggests momentum may be getting ready to shift to the upside.

A trade through 1.0397 will negate the closing price reversal bottom and signal a resumption of the downtrend. A trade through 1.0774 will change the main trend to up.

A move through 1.0485 will confirm the closing price reversal bottom and shift momentum to the upside.

The minor range is 1.0774 to 1.0397. Its retracement zone at 1.0586 to 1.0630 is the nearest upside target price.

Daily Swing Chart Technical Forecast

Trader reaction to 1.0441 is likely to determine the direction of the EUR/USD early Wednesday.

Bullish Scenario

A sustained move over 1.0441 will signal the presence of buyers. Taking out 1.0485 will indicate the buying is getting stronger. If this creates enough upside momentum then look for a possible near-term rally into 1.0586 to 1.0630.

Bearish Scenario

A sustained move under 1.0441 will indicate the presence of sellers. This could trigger a break into 1.0397. Taking out this level will signal a resumption of the downtrend with the main bottom at 1.0354 the next target price. This will put the EUR/USD in a position to challenge the January 3, 2017 main bottom at 1.0339.