Fed preview: What to expect of EUR/USD?

EUR/USD  gained bullish momentum ahead of the Fed’s decision but still remains trading in a small range, limited, like it has been the case during the previous days. It was hovering above 1.1150, recovering after sliding during the Asian session.  Price remains between 1.1120 and 1.1200. Today’s event is likely to trigger volatility in the EUR/USD pair.

Could the Fed break the range?

At 18:00 GMT the FOMC will announce its decision with the release of a statement and it will also publish forecast projections (the “dot plot”). Then at 18:30 Janet Yellen will hold a press conference. Consensus point toward no rate change and the risk is for a rate hike. According to an FXStreet survey, most contributors (74%) expect a rate hike in December and only 8% a rate hike today.

The decision, the statement, the dot plot and Yellen’s words have a strong potential to impact markets and the US dollar. A hawkish message is likely to boost the US dollar while on the other direction, a dovish tone could weaken the greenback.

Trade Sep 21 Federal Reserve interest rate decision - Live Coverage

Levels to watch

Currently, EUR/USD is moving on a wider perspective with a bearish bias. It is receiving support from the 1.1120 area, where the 55-day moving average currently stands. A consolidation below 1.1120/00 could expose 1.1050 and below here attention would turn to July lows at 1.0940/50. To the upside, the immediate relevant resistance could be seen at 1.1200 (20-day moving average), that limited the upside during the current week. Above here, the next area to watch is 1.1280. A break higher could open the doors for further gains at least from a technical perspective.

According to Valeria Bednarik, Chief Analyst at FXStreet, the daily chart shows EUR/USD maintaining a neutral stance, with the downside slightly favored as the price seems unable to advance beyond its moving averages.

“A huge trigger is needed to take the pair out of the 1.0840 and 1.1460 range, as with a couple of short-lived exceptions, the pair has been stuck between those two levels since the beginning of 2015. And the FED won't be enough, doesn't matter how hawkish it could be, unless they actually raise rates. That will be an "all hell breaks loose" scenario that will keep traders entertained for more than a couple of sessions”, concluded Bednarik.