EUR/USD remains depressed below 1.0800, awaits Fed ahead of ECB on Thursday

• EUR/USD trades with a mild negative bias on Wednesday amid a modest USD strength.
• The downside remains cushioned as traders wait for the crucial FOMC policy decision.
• The market attention will then shift to the ECB monetary policy meeting on Thursday.

The EUR/USD pair edges lower on Wednesday, albeit manages to hold above the 100-hour Simple Moving Average (SMA) through the first half of the European session. Spot prices currently trade just below the 1.0800 mark, down less than 0.10% for the day, as traders keenly await the outcome of the highly-anticipated two-day FOMC policy meeting before positioning for a firm intraday direction.

The Federal Reserve (Fed) is scheduled to announce its decision later during the US session and is universally anticipated to maintain the status quo. Traders, meanwhile, have been trimming their bets for an early policy easing by the Fed amid signs of a still resilient US economy, as depicted by Friday's stronger monthly jobs report and consumer inflation figures released on Tuesday. This, along with some repositioning trade ahead of the key central bank event risk, acts as a tailwind for the US Dollar (USD), which, in turn, is seen weighing on the EUR/USD pair.

The shared currency, on the other hand, is undermined by the recent dovish rhetoric by European Central Bank (ECB) officials. In fact, the ECB's hawkish board member Isabel Schnabel earlier this month said that the central bank could take further interest rate hikes off the table in the wake of a significant decline in inflationary pressures. This further contributes to a mildly offered tone surrounding the EUR/USD pair. The downside, however, remains cushioned as traders might wait for a dovish ECB tilt at the end of the December policy meeting on Thursday.

Meanwhile, the aforementioned mixed fundamental backdrop, along with the recent range bound price action witnessed over the past week or so, warrants caution before positioning for any firm near-term directional. Bearish traders are likely to wait for a sustained break below the 100-day Simple Moving Average (SMA) before positioning for an extension of the recent pullback from a multi-month peak touched in November. Conversely, a sustained strength beyond the 200-day SMA barrier, around the 1.0825 region, will shift the bias in favour of bulls.

Technical levels to watch