EUR/USD parked around 1.2000 ahead of FOMC

The single currency keeps the positive note vs. its American peer on Wednesday, with EUR/USD managing quite well to keep the trade above the critical 1.2000 barrier.

EUR/USD attention to the Fed

Spot maintains the bullish bias so far this week, prolonging the strong rebound from last week’s lows in the 1.1840/35 band and with gains so far limited around today’s peaks in the 1.2020 region.

Absent releases in Euroland, the FOMC meeting should grab all the attention this week. Despite the probability of a Fed’s move on rates is close to zero, market participants will look for hints on the potential timing of the reduction of the Fed’s balance sheet.

Further news around EUR comes from comments by ECB’s Knot, who suggested that the recent strength in EUR is a reflection of a ‘benign assessment of the economy’.

In view of strategists at TD Securities, “Our base-case is for the policy statement and press conference to convey a cautiously optimistic tone while the accompanying projection materials should reveal a downgrade to the long-run dot while leaving the median 2017 and 2018 dots unchanged. However, we believe the risks lean towards a more dovish outcome”.
In the meantime, extra gains in spot are not ruled out as long as it continues to trade above the 5-month support line, today near 1.1840. However, the bearish divergence in the daily RSI (14) prompts some caution in the near to medium term.

The view of further upside is somewhat reinforced by the recent activity in the EUR futures markets.

Additional US releases today include August’s existing home sales and the DoE’s weekly report on crude oil stockpiles.

EUR/USD levels to watch

At the moment, the pair is up 0.06% at 1.2001 and a break above 1.2041 (high Sep.11) would target 1.2092 (2017 high Sep.6) en route to 1.2167 (50% Fibo of the 2014-2017 drop). On the flip side, the immediate support aligns at 1.1968 (21-day sma) followed by 1.1864 (5-month support line) and finally 1.1837 (low Sep.14).