EUR/USD price trades within tight 0.3% range ahead of Fed key rate decision
Currently, EUR/USD trades at 1.0423
The EUR/USD pair has been navigating a bullish ascending channel in recent weeks, but current market conditions and upcoming U.S. monetary policy decisions might test its resilience.
The pair recently experienced a retracement within this channel, and since the European session on Tuesday, EUR/USD has shown limited volatility, fluctuating only by 0.3% within the tight range of 1.0446 to 1.0413. Currently, it trades at 1.0423 in today's European session, suggesting a market in wait-and-see mode.
The EUR/USD immediate future could face headwinds from a risk-off sentiment, particularly with the Federal Reserve's interest rate decision looming later in the North American session. The U.S. dollar finds support from the Fed's stance, which according to the CME FedWatch tool, has nearly 100% market expectation of maintaining the current policy rate range of 4.25%-4.50%.
However, the real market mover might be Fed Chair Jerome Powell's press conference. Traders are on edge, looking for any indication of future policy direction that could influence the dollar's strength.
Market's tight range reflects anticipation of Fed comments
From a technical perspective, the EUR/USD low at 1.0413 was held by the 50 EMA on the 4-hour chart, providing near-term support. On the resistance side, the pair is poised to face a challenge at the Fibonacci golden ratio, which coincides with the 50-day EMA and could potentially cap upward movements. Support is further reinforced by the ascending channel's trendline, which aligns with the 50% Fibonacci level.
EUR/USD price dynamics (November 2024-January 2025). Source: TradingView.
This setup suggests that while the EUR/USD has been in a bullish trend, the immediate short-term outlook might be swayed by the Fed's comments. If Powell hints at a dovish turn or any unexpected policy shift, this could weaken the dollar, possibly allowing EUR/USD to break through resistance. Conversely, reaffirmation of a steady or hawkish policy could strengthen the dollar, pushing EUR/USD towards or below its current support levels.
In conclusion, EUR/USD traders are at a pivotal moment, with technical indicators offering a framework but the real action likely to come from the Fed's communication. The market's tight range reflects this anticipation, with eyes fixed on how the Fed's decision might alter the currency pair's trajectory within its ascending channel.
The EUR/USD pair reached a six-week high of 1.0533, but faced resistance at the Fibonacci 0.786 level. This technical barrier, combined with dovish central bank expectations, led to a 0.7% drop.
