- EUR/USD stuck in a narrow range ahead of the FOMC decision.
- Lagarde’s speech also eyed, as the Fed is likely to hold fire.
- Higher DXY and Treasury yields weigh on the spot.
EUR/USD is holding the lower ground below 1.2100 but remains well above the 100-DMA support at 1.2056 ahead of ECB President Lagarde’s speech and the all-important FOMC decision.
The US dollar tracks the resurgent demand in the Treasury yields, weighing on the main currency pair. The cautious sentiment around the global stocks amid growing covid concerns in emerging economies and doubts over US President Joe Biden’s $2.25 trillion infrastructure stimulus package underpin greenback’s safe-haven demand.
Bloomberg reported earlier on, “President Joe Biden and his economic team are planning to forgo an expansion of the estate tax in the administration’s coming individual tax-hike proposals.”
Upbeat US CB Consumer Confidence data fuelled the rally in the Treasury yields, which lifted the dollar. The index rose in April to 121.7 from 109.0 in March, beating expectations by a big margin. Meanwhile, the stocks traded mixed, shrugging off encouraging earnings.
On the EUR side of the story, the euro remains uninspired by the German government’s upward revision to the economy’s 2021 growth forecasts, as surging covid cases outweigh.
“This Wednesday, Germany will publish the May GFK Consumer Confidence Survey, foreseen at -3.5 from -6.2 previously. In the US, the focus will be on the Federal Reserve, as the central bank will announce its decision on monetary policy,” explains FXStreet’s Chief Analyst, Valeria Bednarik.
“No surprises are expected this time, although investors expect chief Jerome Powell to acknowledge the improvement in the employment sector and hence, offer a more hawkish speech. Tightening will likely remain off the table,” Valeria adds.
EUR/USD technical levels
FXStreet’s Analyst Anil Panchal notes, “an ascending support line from March 31, near 1.2065 will test the short-term EUR/USD declines ahead of the key 100-day SMA level near 1.2055. Alternatively, an upside clearance of the stated resistance line close to 1.2115 should successfully cross the monthly top of 1.2116 before directing the run-up towards the 1.2200 thresholds.”