The pair will likely continue falling ahead of the upcoming Fed decision.
Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.1200.
- Add a stop-loss at 1.1350.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1300 and a take-profit at 1.1400.
- Add a stop-loss at 1.1200.
The EUR/USD pair declined slightly as traders waited for the upcoming Federal Open Market Committee (FOMC) interest rate decision. The pair is trading at 1.1285, which is about 1.75% below the highest level this month.
Fed Decision Preview
The FOMC started its two-day meeting on Tuesday this week. The meeting comes at a time when recent data have been supportive of the American economy. For example, earlier this month, data revealed that the American unemployment rate declined to a pandemic-era low of 3.9%. This means that the country is in a full-employment situation.
Additional data showed that the country’s inflation was also rising. The headline consumer price index (CPI) rose to a 42-year high of 7%. Excluding food and energy prices, data showed that inflation has jumped to over 5% in December.
At the same time, data showed that the American building permits and housing starts jumped sharply in December. Home prices have also done well, helped by the relatively low consumer inflation data. The only negative data was December’s retail sales numbers.
Therefore, there is a likelihood that the Federal Reserve will sound a bit hawkish when it delivers its interest rate decision today. Analysts expect that the bank will leave interest rates at the current range of 0% and 0.25%. At the same time, the bank is expected to hint that it will implement between 3 and 4 rate hikes this year.
The EUR/USD pair has also been in a downward trend because of the rising risks in the financial market. This explains why the S&P 500 and Nasdaq 100 indices have declined into the correction zone. Investors are both worried about rising inflation and the ongoing crisis about the United States and Russia.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair formed an ascending triangle pattern that is shown in blue. The pair managed to move above the upper side of the ascending triangle pattern in January and rose to a high of 1.1487. This rebound was short-lived as the pair has moved below the ascending line of the triangle pattern.
The pair has also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is hovering slightly above the oversold level. Therefore, the pair will likely continue falling ahead of the upcoming Fed decision. This could see it test the support at 1.1200.
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