On Wednesday, the EUR/USD stays limited in a range since it lacks a clear intraday direction. The pair benefits from the overall unfavorable mood around the USD. Ahead of the ECB meeting on Thursday, investors are looking to the FOMC decision for inspiration.
On Wednesday, the EUR/USD pair failed to generate real momentum and oscillated inside a small range for most of the European session. However, spot prices can maintain themselves firmly above the 1.0600 level and are still within striking distance of the more than five-month top reached on Tuesday.
In anticipation of a less aggressive Fed policy tightening, the US Dollar is hovering at its lowest level since late June, which benefits the EUR/USD pair. The softer-than-expected US consumer inflation statistics reported on Tuesday solidified the market expectations for a comparatively modest 50 bps Fed rate rise after a two-day meeting later this Wednesday. As a result, US Treasury bond rates continue to be low, which, combined with a solid stock market performance, impacts the value of the safe-haven dollar.
However, market investors are uneasy and prefer to wait for policymakers’ opinions on indications that inflationary pressures in the US are receding. This temporarily restricts the upward potential for the EUR/USD pair and provides some support to the US dollar. As a result, the market’s attention will be focused on the eagerly awaited FOMC decision, which will be revealed later during the US session. In addition, investors will look for hints regarding the Fed’s rate-hike path in the accompanying policy statement and the dot plot.
The result will be crucial in determining the dynamics of the USD price in the short future and provide the EUR/USD pair with some significant push. Next, attention will turn to the ECB meeting on Thursday, which should assist in defining the major’s next leg of a directional move. Traders may choose not to place new bets as significant central bank event risks approach, enhancing the likelihood that the calm/range-bound price action will continue. Despite this, the fundamental and technical background favors bulls.
