• A few buyers entered the EUR/USD market as it retreated from the two-week low it reached on Tuesday.
• Before the Fed makes its decision, positive trades should exercise some caution due to the technical situation.
• More profound losses should be possible if there is a persistent breach below the 1.0835 confluence.

Wednesday’s Asian session saw a slight increase in the EUR/USD pair, which appears to have ended a two-day losing run that had sent it to a roughly two-week low at the 1.0835 zone hit the day before. But there isn’t much follow-through purchasing at spot prices as traders aren’t willing to take big risks and would rather sit it out in anticipation of the results of today’s much-awaited two-day FOMC policy meeting.

Although it is generally anticipated that the Federal Reserve (Fed) will maintain rates at their record highs, the Fed may reduce its forecast for rate cuts in 2024 to two from three due to persistently high inflation. Therefore, the “dot plot” will continue to be the center of attention as it is closely examined for clues on the future path of rate cuts, in conjunction with comments made by Fed Chair Jerome Powell. This will, therefore, have a significant impact on the dynamics of the US Dollar (USD) market and provide the EUR/USD pair with a new direction.

The most recent technical retreat from the 1.0980 region, which was the highest level since January 12 hit earlier this month, stopped close to the 1.0835 confluence support. The region above includes the crucial 200-day Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the positive advance that occurred in February and March. These levels may serve as crucial pivot points and continue to guard the immediate downside. Bears will view a decisive break below as a new catalyst, and the EUR/USD pair will drop as a result.

The daily chart’s oscillators have recently begun to move negatively. Thus, spot prices may accelerate their decline to the 61.8% Fibo level around 1.0800, which would take them closer to the 1.0760–1.00755 range. The EUR/USD pair may be vulnerable to a retest of sub-1.0700 levels or the YTD low that was reached on February 14 if there is some follow-through selling.

Conversely, any further advance towards the 23.6% Fibo support breakpoint, around the 1.0900 round-figure mark, is likely to encounter strong resistance. If the EUR/USD pair continues to rise, it might indicate that the corrective pullback has reached its peak and returned to the monthly high, which is located around 1.0980. The momentum may continue past the psychological 1.1000 barrier and towards the next significant obstacle, which is located close to the 1.1040 zone.

EUR/USD daily chart