EUR/USD is trading around 1.1850 on Wednesday gradually consolidating its losses recorded earlier. For now, tension is mounting ahead of the last Fed decision before the elections and the United States retail sales.
Taking a look from a technical angle, the currency pair’s inability to rise above the 1.1900 mark suggests that there might be a possible near-term bullish exhaustion. With that in mind, any considerable slide towards the 1.1800 mark might still be considered to be a buying opportunity.
That is followed by strong horizontal support that has formed near mid-1.1700s. If broken, it will be considered as a fresh trigger for bearish traders. The pair might then increase its fall heading to the August monthly swing lows that formed in the 1.1700-1.1695 region.
If that zone is broken decisively, it will set the stage for an extension of the recent corrective drop from the levels beyond the key 1.2000 psychological mark.
On the other hand, the 1.1900 mark might continue to act as immediate strong resistance. In that connection, any subsequent positive move will probably encounter some fresh supply near the 1.1935-40 region. A strong surge beyond that level will negate any near-term bearish bias and help the bulls to make a new attempt to push this pair back above the 1.2000 level.
EUR/USD Supporting Factors
Multiple supporting factors helped the EUR/USD pair to regain some follow-through traction in the first half of the trading activities on September 15. The increasing optimism over a potential vaccine for the highly contagious COVID-19 pandemic remained supportive of the positive market mood.
Interestingly, the global risk sentiment got an extra boost from the stronger-than-expected Chinese macro data. That news reinforced expectations for a V-shaped recovery for the world’s second-largest economy. That occurrence, in turn, weighed heavily on the US dollar’s relative haven status and helped the pair to build on its previous bounce from the levels of mid-1.1700s.
This shared currency was also supported by some encouraging data that came from the Eurozone. In that connection, the German ZEW Economic Sentiment unexpectedly surged to 77.4 in September from 71.5. The report indicated that experts continue to anticipate a significant recovery for the Eurozone’s biggest economy.
In addition to that, the Eurozone ZEW Economic Sentiment climbed to 73.9 and it pushed the pair back to the 1.1900 mark. But, the momentum lacked any significant follow-through and rapidly lost most of its steam on the back of a late US dollar rebound.
The dollar got some support after the release of the Empire State Manufacturing Index. This Index spiked to 17.0 in September from 3.7 previous and it easily surpassed market expectations by far. That reading was significantly strong enabling it to offset the disappointing release of the US Industrial Production figures; that posted a mere 0.4% growth in August as compared to 3% recorded in July.
Besides that, some repositioning trade ahead of the highly anticipated FOMC decision on September 16 made traders reduce their bearish US dollar bets. The EUR/USD pair retreated about 60 pips from daily tops; and finally was seen consolidating near the lower end of its daily trading range. Nevertheless, it lacked any significant follow-through.
On Wednesday, the pair managed to hold steady below mid-1.1800s through the Asian session. For now, it remains at the mercy of the USD price dynamics in the absence of any considerable market-moving economic releases from the Eurozone.
In the meantime, the United States economic dockets highlight the release of Monthly Retail Sales data for August. That data will be looked upon for some significant tradingimpetus ahead of the key central bank event. All eyes are now on the Fed later today before any direction by the EUR/USD trading pair forms.