EUR/USD Technical Analysis: Navigating Decisions from Fed and ECB

In the early hours of Wednesday’s Asian trading session, the EUR/USD pair remains confined below the 1.0800 level. Trading at 1.0792, it shows a slight 0.04% decline for the day. This trading activity occurs against the backdrop of impending monetary policy decisions from the Federal Reserve (Fed) on Wednesday and the European Central Bank (ECB) on Thursday.

Inflation Reports and Central Bank AnticipationsThe recently released U.S. inflation report aligned closely with market forecasts. The headline Consumer Price Index (CPI) for November rose 0.1% month-over-month, following a flat reading in October. Year-over-year, the headline CPI moderated from 3.2% to 3.1%. The Core CPI, which excludes volatile food and energy prices, increased to 0.3% month-over-month, with a year-over-year growth of 4.0%.

The ECB, in its Thursday meeting, is anticipated to hold interest rates steady despite Eurozone inflation approaching its 2.0% target. The ECB aims to temper market expectations for an early rate cut, highlighting persisting upside price risks, particularly from increasing wages. ECB President Christine Lagarde previously expressed the need for evidence of labor market tightness not igniting further inflation.

On the German economic front, the ZEW Indicator of Economic Sentiment surpassed expectations at 12.8, while the Current Situation Index dipped to -77.1. The Eurozone ZEW Economic Sentiment Index also exceeded forecasts at 23.0.

Federal Reserve’s Stance and Market ProjectionsMarket predictions suggest the Fed will maintain its benchmark overnight borrowing rate between 5.25% and 5.5% at the December meeting. Markets are also pricing in notable rate cuts, with a high probability of a reduction in May, per the CME FedWatch Tool.

Upcoming Economic Data and Impact on EUR/USDThe release of the US Producer Price Index (PPI) on Wednesday, ahead of the Fed’s rate decision, is keenly awaited. Post-meeting, Fed officials will update economic growth, inflation, and labor market forecasts, offering traders key insights for the EUR/USD pair.

EUR/USD Current Technical Outlook

The EUR/USD pair faces resistance at the EMA50, exhibiting a slight bearish tilt, while oscillating between key levels of 1.0760 support and 1.0860 resistance.

A break above this resistance could lead to a bullish correction towards 1.0960, while breaching the support might result in a bearish trend aiming for 1.0645.

The trading range for the day is expected between 1.0700 support and 1.0870 resistance, with a neutral trend anticipated for the day.

EUR/USD Live Chart