EURUSD is still fluctuating between major technical levels.
In the early American session on Tuesday, the EURUSD reached a new weekly high at 1.0830 before losing its positive momentum. As investors prepare for the Federal Reserve (Fed) policy announcements. The pair moves in a narrow band around 1.0800 early Wednesday.
According to US data, inflation, as measured by the change in the Consumer Price Index (CPI), fell to 3.1% year on year in November. As expected. In the meanwhile, the Core CPI. Which excludes volatile food and energy prices, gained 0.3% month on month. Matching market expectations. Investors resisted establishing significant positions following inflation figures. Making it harder for the EURUSD to find direction.
The Fed’s policy rate is widely projected to remain steady at 5.25%-5.5%.
Following the Fed’s last policy meeting in 2023, the policy rate is likely to remain constant at 5.25%-5.5%. Because such a choice has already been priced in. Investors will be looking for new hints about the timing of a possible policy shift in 2024 in the revised Summary of Projections (SEP), popularly known as the dot plot.
According to the CME Group FedWatch Tool, markets believe the Fed will lower its policy rate by 25 basis points as early as March. In the event that the Fed Chairman Jerome Powell pushes back against this market assumption, repeating that it is still too early to consider a rate cut. Which might be interpreted as a hawkish stance and assist the USD gain strength against its rivals.
On the other hand, if the dot plot indicates at least 100 basis points of rate cuts next year and Powell keeps the door open for a rate decrease in the first half of the year by adopting an upbeat tone regarding the inflation forecast, EURUSD might gain bullish momentum.
EURUSD Technical Analysis
EURUSD is still locked between 1.0750 and 1.0830. Which are the 100- and 200-day Simple Moving Averages (SMA). To determine its next step, the couple must exit that channel.
Short-term goals. EURUSD might reach 1.0860 (100-period SMA on the 4-hour chart) and 1.0900 (psychological milestone, static level) if it breaks above 1.0830.
If 1.0750 support fails, the next negative targets might be 1.0700 (psychological level. Fibonacci 61.8% retracement) and 1.0660 (static level).
