The EUR/USD pair sticks to a negative bias for the fifth straight day and trades around the 1.1535-1.1530 area during the Asian session on Wednesday. Spot prices remain close to a one-month trough, touched on Monday, as traders now look forward to the highly anticipated FOMC decision for a fresh impetus.
The US Federal Reserve (Fed) concludes its September policy meeting today and is widely expected to raise interest rates by 25 basis points (bps). The market focus will also be on updated economic projections, which, along with Fed Chair Kevin Warshs remarks during the post-meeting press conference, will be scrutinized for more cues about the rate path in coming months. The outlook, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and drive the EUR/USD pair.
Heading into the key central bank event, inflation risks stemming from rising energy prices underpin prospects for further policy tightening by the Fed. In fact, crude oil prices shot to a fresh high since May 20 on Tuesday amid growing concerns about supply disruption in the Middle East. Adding to this, a surge in public and corporate borrowing lifted the yield on the benchmark 10-year US Treasury bond to its highest level since April 2007, underpinning the USD and exerting pressure on the EUR/USD pair.
Apart from this, escalating US-Iran tensions further benefit the safe-haven buck and help the USD Index (DXY), which tracks the Greenback against a basket of currencies, stand firm near a two-week top. However, the European Central Banks (ECB) hawkish outlook offers some support to the Euro and limits losses for the EUR/USD pair. Nevertheless, the aforementioned fundamental backdrop suggests that any attempted intraday recovery move could get sold into and is more likely to remain capped.
EUR/USD daily chart
Technical Analysis
The EUR/USD pair holds just above the 50.0% Fibonacci retracement at 1.1533 but remains capped by the 100-day Simple Moving Average (SMA) at 1.1554, keeping the near-term tone mildly bearish. A break there would expose deeper supports at the 61.8% level at 1.1491, 1.1431 and 1.1355, where prior retracement levels cluster.
On the topside, initial resistance is seen at the 100-day SMA at 1.1554, followed by the 38.2% Fibo. retracement at 1.1575 and then the 23.6% retracement at 1.1627, with the recent cycle high near 1.1712 acting as a more distant barrier.