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  • EUR/USD bears could not break 1.04000 ahead of the Fed meeting.
  • Investors expect a 75-bps rate hike by the Fed.
  • The US dollar could be pushed lower if rate hike expectations are unmet.

The EUR/USD outlook remains slightly positive as it is pushing higher after finding support at 1.04000 ahead of the Fed meeting. Markets have priced in a 95% chance of a 75-bps rate hike today, according to the CME’s Fedwatch tool.

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Investors’ expectations went up after the Wall Street Journal reported that a more significant rate increase was possible due to the hot US inflation data. The dollar has been pushing higher thanks to the Fed’s tightening of its policy ahead of other central banks and its safe-haven status.

However, the pair could struggle to push higher after the meeting as investors already have such high expectations. It is more likely to tumble if these expectations are not met.

“Given current aggressive market pricing, there is a risk the (Federal Open Market Committee) is deemed ‘not hawkish enough,’ pulling down US interest rates and the USD modestly after the meeting,” said CBA analysts in a morning note.

On the other hand, the emergency meeting of the ECB to overview the bonds market situation and to create ground for future rate hikes has given some strength to the Euro across the board.

EUR/USD key events today

EUR/USD investors will be sitting on the edges of their seats today as they wait for the Federal Reserve meeting. The importance of this meeting is likely to cause a consolidation in the pair as most investors will be sitting on their hands patiently waiting to see the outcome of the meeting.

EUR/USD technical outlook: Recovery may surpass 1.050

EUR/USD outlook

Looking at the 4-hour chart, we see that the price has found support at 1.04000 and is now consolidating between 1.04671 and 1.04000. This pause in the bearish trend shows bears are exhausted, as RSI shows, which got oversold.

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Bears are waiting to see if they can push the price lower, while bulls are coming in to see if they can push the price higher. If the price breaks below 1.0400, we could see a continuation of the trend. However, if the bulls are more robust, we could see the price pushing to retest 1.0500 before pushing lower.

The bias will stay bearish if the price keeps trading below the 30-SMA and the RSI stays below 50.

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