EUR/USD gains some traction ahead of Fed rate announcement

The EUR/USD pair once again found some buying interest in the vicinity of 1.0600 handle and is now heading back towards the top end of daily range.

Currently trading around mid-1.0600s, the pair has now reversed Tuesday's minor losses as the prevalent risk-off mood, amid cautiousness ahead of the much awaited Fed monetary policy decision, is seen extending support to the funding currency - Euro. Adding to this, tumbling US Treasury bond yields is further supporting the pair's bid tone on Wednesday. The momentum, however, lacked conviction and the pair remained below yesterday’s high resistance near 1.0665 level. 

Market focus will remain glued to the final outcome of a two-day FOMC meeting, which would help investors evaluate possibilities and timing of next Fed rate-hike action in 2017 and eventually provide fresh impetus for the pair's next leg of directional move. In the meantime, US economic docket, featuring the release of monthly retail sales and PPI print would in traders' radar during early NA session.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "the EUR/USD pair is trading not far from the 1.0500 region, a major static support, and the first bearish target in the case of a dollar run. Below it, 1.0460 is the next support, as the level stands for 2016 low. It would take an extremely hawkish FED to see the pair breaking below it, with investors then targeting the  1.0400 region."

"A non-hike will be chaotic, as the pair may run back towards 1.0800 as it did post-ECB. The pair can also surge on a dovish stance, with no big revisions to the dot-plot. The immediate resistance is 1.0700 ahead of the mentioned 1.0800 level. It would take a daily close beyond 1.0840, to consider an interim bottom in the pair, and see further advances in the days to come."