- EUR/USD grinds higher while defending the previous day’s U-turn from 21-DMA, upside break of one-week-old resistance.
- Bearish MACD signals, limited room towards the north suggest bulls run out of steam.
- Euro sellers need validation from 21-DMA, late March swing high.
EUR/USD prints mild gains around 1.1010 while keeping the previous day’s rebound from the lowest levels in a week amid early Wednesday. In doing so, the Euro pair aptly portrays the market’s cautious mood ahead of the key US data and the Federal Open Market Committee (FOMC) monetary policy meeting announcements.
That said, a clear bounce off the 21-DMA support, around 1.0970 by the press time, followed by an upside break of the one-week-old previous resistance line, now nearby support around 1.0990, keeps the EUR/USD pair buyers hopeful.
However, a one-month-old previous support line, close to 1.1025 at the latest, precedes an upward-sloping resistance line from February 2023, surrounding 1.1075, to challenge the EUR/USD bulls.
It’s worth noting that the MACD signals are bearish but the RSI (14) line is firmer, not overbought, which in turn suggests a gradual run-up in the EUR/USD prices.
On the contrary, a downside break of the previous resistance line from April 26, now immediate support near 1.0990, could direct the Euro sellers towards the 21-DMA support of 1.0970.
Following that, tops marked during late March around 1.0930 may check EUR/USD bears before giving them control.
EUR/USD: Daily chart
Trend: Limited upside expected
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The EUR/USD currency pair has been trading within a small range near the 1.1000 level over the past few days amid pre-Fed anxiety regarding potential changes in the central bank’s monetary policy this week. Despite the Euro’s advanced relative strength index (RSI), Euro bulls are struggling to push the pair higher as the US dollar remains under pressure due to inflation concerns.
The Euro’s relative strength against the US dollar has held within the current narrow range near the 1.1000 level since April 15th, 2021. After reaching its highest level in two years at 1.2143 on April 9th, the pair has been pulled back and is now trading at 1.1028.
The resurgence of the US dollar after the US job market report on April 16th has been pushing the Euro down and keeping investors wary regarding the single currency. This comes as traders and investors anticipate the Federal Reserve’s statement and press conference later this week, during which we are expecting the FOMC to signal its intention to taper its bond-buying program.
Some analysts are predicting that the Euro may rise in the near-term if the Fed indicates that it does not plan to reduce its bond purchases or if it does, then the decreases are not as significant as investors feared. Additionally, Euro bulls are still optimistic about the European recovery, as the Eurozone is expected to grow faster than the US this year.
But the Euro bulls’ efforts to push the pair higher may be hindered by traders’ recent caution over inflation and its potential impact on the US economy. This comes as traders focus on the fact that the US economy is already recovering faster than Europeans after the coronavirus pandemic.
In conclusion, the EUR/USD pair has been trading within a narrow range near 1.1000 as Euro bulls struggle to push the pair higher as US dollar continues under pressure due to inflation concerns. Investors and traders will be watching the Federal Reserve’s statement later this week, as it its decision will have a significant impact on the pair’s near-term direction.