It has been a relatively quiet day across the forex. As mentioned in an earlier update, Wednesday’s meeting of the U.S. Federal Reserve (FED) is having a considerable impact upon market participation. At least for now, traders are taking a “wait and see” approach to the currency markets.

The probability of a rate hike for the USD coming from tomorrow’s meeting is low. Currently, the CME FEDWatch Tool is assigning a 95% chance of rates remaining at a static 125-150 basis points. Amid the aftermath of Davos, the FED is expected to extend a passive stance toward the fading greenback.

EUR/USD Technicals

The EUR/USD daily chart illustrates the degree of recent market consolidation. For now, traders are happy with the two-way action surrounding the 1.2400 level.

The range between 1.2500 and 1.2400 is proving to be a critical area. Even though price is well off of the early year high at 1.2537, this market remains bullish. Wednesday’s trade will give us a much clearer picture of where we are headed for the intermediate-term.

Here are a few levels to watch in the coming hours:

• Resistance(1): Psyche level, 1.2400
• Resistance(2): Psyche level, 1.2500
• Support(1): 20 Day EMA, 1.2222
• Support(2): Bollinger MP, 1.2188

Overview: From a technical standpoint, sentiment remains bullish. Without a sustained test of any support levels, there is no reason to question the prevailing trend.

Of course, things can change quickly! Any surprises from tomorrow’s FED announcements will drive this market directionally. At least for now, “caution” is the theme of the day.