EUR/USD remains under pressure near 0.9900 ahead of Fed

• EUR/USD keeps the selling bias well in place on Wednesday.
• The dollar trades close to the earlier 20-year highs near 111.00.
• The Federal Reserve is predicted to raise rates by 75 bps.

EUR/USD maintains the bearish mood around the 0.9900 neighbourhood after briefly probing the 0.9880 region on Wednesday.

EUR/USD offered ahead of Fed’s decision

EUR/USD met a wave of selling orders soon after hitting fresh multi-session peaks around 1.0050 on Tuesday. Since then, it was a one way move to earlier 2-week lows in the 0.9885/80 band.

The sharp 2-day decline in the pair comes exclusively in response to the equally strong upside momentum in the greenback, which appears in turn bolstered by expectations of extra rate hikes by the Fed in the upcoming months.

What to look for around EUR

EUR/USD extends further the corrective decline to the area below 0.9900 ahead of the interest rate decision by the Federal Reserve. In the meantime, the pair’s very near-term price action is expected to be determined by developments from the FOMC event later on Wednesday.

So far, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence.

On the negatives for the single currency emerge the so far increasing speculation of a potential recession in the region, which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals.

Key events in the euro area this week: Flash Consumer Confidence (Thursday) – EMU, Germany Flash Manufacturing/Services PMI (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle. Italian elections in late September. Fragmentation risks amidst the ECB’s normalization of its monetary conditions. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EUR/USD levels to watch

So far, the pair is retreating 0.64% at 0.9904 and a breach of 0.9884 (weekly low September 21) would target 0.9863 (2022 low September 6) en route to 0.9859 (December 2002 low). On the other hand, the initial hurdle comes at 1.0091 (55-day SMA) seconded by 1.0197 (monthly high September 12) and finally 1.0297 (100-day SMA).