EUR/USD Exhibits Cautious Sentiment Ahead of Key Fed Meeting

The EUR/USD pair reflects the cautious sentiment prevailing in the market as it hovers around 1.1050 ahead of the crucial Federal Reserve (Fed) monetary policy meeting during the European session on Wednesday.The pair’s movement also mirrors the market’s mixed outlook regarding the Fed and the European Central Bank (ECB) in light of recent lackluster economic data from both regions and emerging challenges to market sentiment.The US Dollar’s pause in its previous pullback from a two-week high, supported by optimistic yields and a cautious atmosphere, poses a challenge to the EUR/USD pair’s rebound from its multi-day low.

Nevertheless, the greenback’s inability to strengthen further due to concerns that the Fed may have limited room for interest rate hikes seems to offer some support to the Euro pair.Notably, the disappointing economic statistics from the Eurozone and Germany have been the primary cause of weakness in the EUR/USD pair over the past six days, presenting challenges to ECB hawks who are ready to combat inflationary pressures through rate increases.Additionally, news indicating fresh tensions between the US and China has added to the pre-Fed consolidation, weighing on the EUR/USD price.

However, the International Monetary Fund’s (IMF) upward revision of global growth forecasts, coupled with previously released downbeat data from major economies, has raised concerns about an earlier end to the rate hike cycle, providing support to the optimists and testing Euro bears.Recent German data showed a decline in the IFO Business Climate Index and Current Economic Assessment for July, reflecting concerns over the German economy’s weak phase. The European Central Bank’s (ECB) quarterly survey of major banks also revealed a drop in firms’ demand for credit to the lowest level since 2003.

Looking ahead, the EUR/USD movement is likely to be limited due to a light calendar in the Eurozone before the Fed’s decision. However, traders should keep an eye on risk catalysts and second-tier US data. Ultimately, the direction of the EUR/USD pair’s recovery will be influenced by how effectively Fed Chair Jerome Powell addresses the concerns of hawks during the press conference.

The EUR/USD pair concluded yesterday with a negative performance and has continued its downward trend today, settling below the 1.1055 level. This suggests that the price is likely to experience further downward pressure in the upcoming trading sessions, aiming to reach negative targets starting at 1.1000 and extending to 1.0940 after surpassing the previous level.As a result, a bearish outlook is anticipated for today, supported by the negative pressure exerted by the EMA50. However, if the pair manages to break above the 1.1055 level, followed by 1.1105, this decline might be halted, leading the price to resume its primary bullish wave.

The projected trading range for today is expected to be between the support level of 1.0960 and the resistance level of 1.1105.