Traders could refrain from major bets ahead of the Fed meeting that would set the tone for the pair through the dollar’s reaction
As the US dollar turned sideways while also retaining a modest bullish bias on Monday, the euro remains below parity, trading under some pressure, with traders getting more cautious ahead of the Federal Reserve’s two-day meeting that kicks off on Tuesday.
The EURUSD pair is now stuck between the 100- and 55-DMAs, clinging to the latter even as risk sentiment looks upbeat at the start of the week. Asian stock markets followed Wall Street higher, posting solid gains despite weaker-than-expected Chinese PMIs.
The shared currency could threaten the 55-DMA, currently at 0.9906, to extend losses to the key 20-DMA if the greenback resumes the ascent in the near term. The USD index looks relatively steady these days after a solid bounce from October lows seen last week around 109.55. Now, the DXY needs to regain the 111.00 zone in order to extend the advance towards the next major target in the 113.00 area.
As such, the euro struggles below parity, albeit the immediate downside pressure looks limited so far. Traders could refrain from major bets ahead of the Fed meeting that would set the tone for the pair through the dollar’s reaction. In fact, the technical picture looks relatively neutral for the time being, with the RSI directionless around 54.
Another 75bp Fed rate hike accompanied by a hawkish forward guidance may drag on EUR/USD later in the week. The euro may also face continued pressure through the whole month, depending on the tone that the US central bank will strike during the upcoming meeting.