Looming US Federal Reserve’s announcement keeps investors on their toes

EUR/USD Current price: 1.0846

  • Germany reported the Harmonized Index of Consumer Prices eased by more than anticipated in January.
  • The United States ADP survey showed the private sector added 107K new jobs in January, worse than expected.
  • EUR/USD is technically bearish and could accelerate south on a break through 1.0800.

Financial markets are on pause this Wednesday, with EUR/USD changing hands around the 1.0840 level and confined to a tight intraday range, ahead of the United States (US) Federal Reserve’s (Fed) monetary policy announcement. The Federal Open Market Committee (FOMC) surprised investors in December by anticipating three rate cuts for 2024. At the same time, however, policymakers were reluctant to provide clearer clues on the extent and timing of such rate cuts.

Financial markets are pretty convinced the Fed will pull the trigger next March, delivering a 25 basis points (bps) rate cut, despite officials arduously trying to cool down such hopes. The FOMC is widely anticipated to maintain its monetary policy unchanged, with the focus on Chair Jerome Powell’s words. In the press conference, Powell will likely avoid giving markets what they want, that is, a certain date for the first rate cut.

Meanwhile, data coming from the Eurozone failed to impress. Germany reported that Retail Sales were down 1.6% MoM in December, worse than anticipated, although the January Unemployment Rate improved in January to 5.8% from 5.9% previously. The country also released the preliminary estimate of the Harmonized Index of Consumer Prices (HICP), which rose 3.1% YoY in January, easing from the previous 3.8%.

Across the pond, the US published the ADP survey on private job creation, showing the country added  107K new positions in January,  much worse than the 145K anticipated by market players. December figure was downwardly revised to 158K from 164K previously reported. With the Fed in the way, EUR/USD showed no reaction to the news.  

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is biased lower. The pair is seesawing around a flat 200 Simple Moving Average (SMA) in the daily chart, while the 20 SMA maintains its bearish slope above the current level, providing dynamic resistance at around 1.0900. At the same time, technical indicators head south within negative levels, although with uneven strength.

In the near term, and according to the 4-hour chart, EUR/USD is neutral. The pair is currently developing around a flat 20 SMA, while the longer moving averages head lower far above the current level. Technical indicators, in the meantime, turned higher, but are currently struggling to overcome their midlines, limiting the bullish potential.

Support levels: 1.0800 1.0760 1.0720

Resistance levels: 1.0900 1.0945 1.0990

View Live Chart for EUR/USD