EUR/USD on Weak Side of Key Retracement Zone Ahead of Fed

The Euro is trading lower but slightly above its weakest level in a month versus the safe-haven U.S. Dollar on Wednesday as cautious traders worried over a potential military conflict in Ukraine and the possibility of accelerated Federal Reserve policy tightening.

At 11:33 GMT, the EUR/USD is trading 1.1280, down 0.0023 or -0.20%. On Tuesday the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $105.02, down $0.16 or -0.15%.

CNBC reported that western leaders stepped up preparations for any Russian military action in Ukraine while Moscow said it was watching with great concern after 8,500 U.S. troops were put on alert to deploy to Europe in the event of an escalation.

Meanwhile, the Fed ends a two-day policy meeting later in the global day, with market players anxiously awaiting further clues on the timing and pace of interest rate hikes, as well as how the central bank will go about slimming down its almost $9 trillion balance sheet, a process dubbed quantitative tightening (QT), CNBC said.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.1263 will signal a resumption of the downtrend.

A move through 1.1483 will change the main trend to up. This is highly unlikely, but due to the prolonged move down in terms of price and time, the EUR/USD is ripe for a closing price reversal bottom.

The short-term range is 1.1186 to 1.1483. The EUR/USD is currently trading on the weak side of its retracement zone at 1.1300 to 1.1335, making it resistance.

The minor range is 1.1483 to 1.1263. Its 50% level at 1.1373 is a potential resistance target.

The main retracement zone resistance is 1.1439 to 1.1499.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD on Wednesday will be determined by trader reaction to 1.1300.

Bearish Scenario

A sustained move under 1.1300 will indicate the presence of sellers. The first downside target is 1.1263. Taking out this level could trigger an acceleration into a pair of main bottoms at 1.1235 and 1.1222.

Taking out 1.1222 will reaffirm the downtrend with the next targets coming in at 1.1186 and 1.1168.

Bullish Scenario

A sustained move over 1.1300 will signal the presence of buyers. The first upside target is 1.1335.

Taking out 1.1335 will be a sign of strength. This could trigger a further rally into 1.1373.

The pivot at 1.1373 is a potential trigger point for an acceleration to the upside with the next major target zone 1.1439 to 1.1499.

Side Notes

As with all major reports from the Federal Reserve, EUR/USD traders should brace for a potential “sell the rumor, buy the fact” reaction.