The EUR/USD is trading lower on Wednesday as investors await the release of the latest interest rate and monetary policy decisions from the Federal Reserve at 18:00 GMT.
While no major policy changes are expected at the meeting, investors will pay close attention to Chairman Jerome Powell’s comments for further insight into the bank’s thinking on inflation and bond purchases.
At 12:38 GMT, the EUR/USD is trading 1.2069, down 0.0023 or -0.19%.
The Fed has committed to continue its $120 billion a month of government bond purchases until “substantial further progress” is made in an economic recovery from the pandemic, but recent strong data has investors looking for any signs that the Fed may start talking about tapering the buying.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, momentum has been drifting lower since the formation of the closing price reversal top on Monday.
A trade through 1.2117 will reaffirm the uptrend. The main trend will change to down on a trade through 1.1994.
The short-term range is 1.2243 to 1.1704. Its retracement zone at 1.2038 to 1.1974 is potential support.
The main range is 1.1603 to 1.2349. Its retracement zone at 1.1974 to 1.1888 is support. This zone is controlling the near-term direction of the EUR/USD.
Two 50% levels at 1.1976 to 1.1974 form a support cluster that could be attractive to buyers if tested.
Daily Swing Chart Technical Forecast
The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to the main top at 1.2117 and the short-term Fibonacci level at 1.2038.
Taking out 1.2117 will indicate the presence of buyers. The daily chart indicates there is plenty of room to the upside over this level with 1.2243 the next major upside target so be prepared for a potential acceleration to the upside. Of course, we’re going to need to see some strong buying volume to trigger the move.
A sustained move under 1.2038 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at 1.1994.
Taking out 1.1994 will change the main trend to down with the price cluster at 1.1976 to 1.1974 the next target.