The EUR/USD currency pair is consolidating around 1.1700 during the Asian trading session on Wednesday, remaining within Tuesday’s range as investors await key monetary policy announcements from the Federal Reserve (Fed) and the European Central Bank (ECB) scheduled for Wednesday and Thursday, respectively [1]. Both central banks are widely expected to keep interest rates unchanged, with the Fed’s federal funds rate anticipated to remain between 3.50% and 3.75%, a level held since January [1][2]. The market is also attentive to the press conference by Fed Chair Jerome Powell, which could provide guidance on future policy direction, especially regarding persistent inflation risks [1][2].
The US Dollar Index (DXY) is trading steadily near 98.65 as traders await the Fed’s decision. The outcome of Powell’s press conference is seen as pivotal, with a hawkish tone potentially boosting the US Dollar against its peers in the near term [2]. Notably, this meeting is likely Powell’s final session as Fed Chair before a transition to nominee Kevin Warsh, though it is unclear whether Powell will remain as a governor or resign, according to commentary from Carol Kong, a currency strategist at Commonwealth Bank of Australia [2].
On the European side, investors are also focused on the preliminary German Harmonized Index of Consumer Prices (HICP) data for April, due at 12:00 GMT. The consensus expects German inflation to accelerate to 3% year-on-year from 2.7% in March [1]. A higher-than-expected reading is generally considered bullish for the Euro [1].
Technical analysis shows EUR/USD trading flat at around 1.1700, closely aligned with the 20-day EMA at 1.1698 and above the 38.2% Fibonacci retracement at 1.1666. The Relative Strength Index (RSI) has shifted into the 40.00-60.00 zone, indicating a loss of upside momentum, though the overall bias remains slightly positive [1]. Immediate resistance is seen at the 50.0% Fibonacci retracement near 1.1745, with further resistance at 1.1825, 1.1938, and the cycle high at 1.2082. On the downside, a break below 1.1666 could expose deeper supports at 1.1567 and 1.1408 [1].
Looking ahead, Thursday will bring the preliminary US Gross Domestic Product (GDP) for Q1 and the Personal Consumption Expenditures (PCE) Price Index inflation report. Weaker-than-expected results from these reports could weigh on the DXY [2].
CONCLUSION
Markets are in a holding pattern as traders await policy decisions from the Fed and ECB, both expected to keep rates unchanged while warning of ongoing inflation risks. The tone of Fed Chair Powell’s press conference and upcoming economic data releases will be critical in determining the next direction for both the US Dollar and the Euro.