EUR/USD Falls Below 1.0950 as Fed Decision Approaches Amid Strength in Dollar and Eurozone Trends
The EUR/USD crossed below the level of 1.0950 during Wednesday morning’s Asian trading, staying at around 1.0935 as market participants take a guarded approach ahead of the U.S. Federal Reserve interest rate determination. The U.S. Dollar received mild lift from more solid industrial production, contributing to traders’ expectation amid the Fed’s revised rate guidance and economic report. Although the central bank is expected to leave interest rates on hold, the press conference and dot-plot that accompany it could provide key policy guidance. Separately, a large spending budget passed by Germany’s parliament could support the Euro, indicating increased investment activity in the Eurozone’s largest economy. KEY LOOKOUTS • Markets watch for the Fed’s rate move and economic forecasts, which will determine the tone of USD movement going forward. • Robust US industrial production figures support the Dollar; additional strength could put pressure on EUR/USD below significant support levels. • Bundestag approval of a significant spending increase could underpin the Euro and restore investor confidence in the Eurozone economy. • Traders are cautious ahead of Fed commentary; increased volatility anticipated after the decision, affecting short-term EUR/USD direction. As the EUR/USD currency pair declines below 1.0950 in anticipation of the highly expected Federal Reserve interest rate decision, market players are keenly observing major events that may influence the near-term direction. The US Dollar has strengthened after positive industrial production figures, increasing hopes for a more aggressive Fed policy. Investors will closely monitor the Fed’s revised economic forecasts and the dot-plot, which may provide key information on the rate path ahead. In the meantime, Germany’s approval of a huge spending budget brings a possible Euro boost, signaling fresh fiscal support for the Eurozone’s biggest economy. Overall, sentiment is still wary, with volatility set to spike after the Fed announcement. EUR/USD falls below 1.0950 as traders wait for the Federal Reserve to make its interest rate decision and revise its economic forecasts. The stronger US Dollar and Germany’s recently approved budget plan are significant drivers of the pair’s movement. Volatility is likely to increase after the Fed announcement. • EUR/USD falls to about 1.0935 during Wednesday’s Asian session, falling below the 1.0950 mark. • Investors stay on guard in anticipation of the Federal Reserve interest rate announcement and economic forecasts later today. • The Fed will likely keep interest rates unchanged, but the dot-plot and press conference can give hints of future policy directions. • US Dollar appreciates slight strength as underpinned by better-than-expected US industrial production data for February (+0.7% MoM). • Germany’s parliament sanctioned a big spending spree, a sign of possible economic recovery in the Eurozone’s biggest economy. • Market sentiment remains divided, with investors in wait-and-watch mode following the Fed announcement. • Greater volatility anticipated in EUR/USD in the wake of the Fed verdict and reports on inflation projections. The foreign exchange market is in wait-and-watch mode with international investors awaiting the coming interest rate verdict of the U.S. Federal Reserve. Though the central bank is mostly expected to leave interest rates as they are, everyone is looking forward to the press conference and new economic projections for clues on the course of future monetary policy. The latest release of robust industrial production numbers in the U.S. has contributed to the expectation, signaling strength in the economy and adding to further interest in the central bank’s inflation and growth outlook. EUR/USD Daily Price Chart Chart Source: TradingView In the meantime, European developments have ushered in a tide of optimism, as Germany’s parliament passed a big-ticket spending plan designed to spur investment. The action is likely to underpin economic recovery efforts in the Eurozone’s biggest economy and potentially bolster market confidence in the region’s growth prospects. With traders waiting on the sidelines for key policy signals, the overall market tone is set by the interplay between U.S. economic vigor and Europe’s revived fiscal efforts. TECHNICAL ANALYSIS EUR/USD is picking up signs of mild weakness following its fall below the 1.0950 level, reflecting cautious market sentiment pre-Fed decision. The pair is now trading close to 1.0935, with near-term support at the 1.0900 psychological level. A break through this region may pave the way for further bear pressure. On the higher side, resistance is expected to be encountered in the 1.0975–1.1000 area, where sellers are likely to re-enter. Overall, the price action indicates a consolidation period, with investors waiting for a clear direction of breakout after major economic indicators from the U.S. Federal Reserve. FORECAST If the U.S. Federal Reserve keeps its policy statement and economic forecasts neutral or dovish, it may cap further gains in the U.S. Dollar. In this context, the Euro could find footing, particularly with Germany’s freshly approved budget plan set to fuel economic sentiment in the Eurozone. Better fiscal prospects in Europe could provide a supportive environment for the EUR/USD pair to move higher if global risk appetite also improves. Conversely, if the Fed hints at a more aggressive policy—i.e., the likelihood of rate hikes or a less aggressive sequence of easing—then the U.S. Dollar will likely pick up even more steam. This will potentially put downward pressure on the Euro, sending EUR/USD lower over the short run. Also, if future Eurozone data does not indicate a robust recovery in spite of Germany’s budget stimulus, market faith in the Euro will further deteriorate, exacerbating the downside risk.
