EUR/USD Price Forecast – EUR/USD Trade Range Bound With Bullish Bias Ahead of US FOMC Update

The EUR/USD pair is holding up well above mid 1.13 handle in Asian trading hours today. As of writing this article, the pair is trading at 1.1383 up by 0.19% on the day and the current price level is up by more than 100 pips from last Friday’s low of 1.1270. The EUR/USD pair built on Friday’s late rebound from over two-week lows and continued gaining positive traction on Tuesday, shrugging off the disappointing release of German IfO business climate index for December owing to broad based USD sell-off dictating momentum. Meanwhile, news that Italy’s government has reached an accord with the European Union on its controversial budget proposal also supported Euro bulls positive momentum but failed to provide trigger for decisive bullish breakout.

1.14 Handle Continues To Provide Strong Resistance To The Upside

The ongoing USD sell-off initiated from USD’s retracement from 1½ year tops set last Friday which was further aggravated over concerns that Fed might slow the pace, or even pause, its policy tightening cycle prompting sharp decline that saw dollar index touch one week lows during yesterday’s trading session. Bearish pressure on US Greenback rose even higher as US President Donald Trump’s verbal intervention on Fed policy further dented the already weaker sentiment. The pair rallied to the 1.1400 handle, over one-week tops, but started retreating from highs and finally settled nearly 40-pips off daily swing high. The pair has since maintained a stable range bound price action in upper half of 1.13 handle across Asian market hours. On release front, investor’s attention is mainly focused on key event of the week – US FOMC interest rate decision.

The US central bank is widely expected to raise benchmark interest rates by 25 bps, fourth hike for this year, and hence, the key focus will be on forward guidance for 2019’s rate hike plans widely referred to as ‘dot-plot’. The Fed’s policy guidance for 2019 will play a key role in driving the short to medium term sentiment surrounding the buck and eventually provide some fresh directional impetus for the major. US markets will see the release of existing home sales and crude oil inventories data while European market will see the release of German PPI data and UK inflation data. Looking from technical perspective, the pair needs to decisively breakthrough 55-day SMA barrier to increase prospects for any further near-term appreciating move currently near 1.1400 mark while the 1.1350-40 region now becomes immediate support to defend, which if broken might turn the pair vulnerable to slide back below the 1.1300 handle and aim towards the 1.1270-65 strong horizontal support, tested last week.