EUR/USD: Technical support recalls 1.1300 but bears stay hopeful ahead of Fed

• EUR/USD struggles to keep the bounce off two-month-old support line.
• Risk sentiment dwindles amid pre-Fed anxiety, Russia-Ukraine tension and IMF’s growth forecasts.
• ECB’s Lane rejects hawkish calls due to Omicron, adding to bearish bias.

EUR/USD dribbles around 1.1300, following a two-day decline to the five-week low. In doing so, the major currency pair struggles to keep the previous day’s corrective pullback as market players brace for the Federal Open Market Committee (FOMC) meeting.

In addition to the pre-Fed fears, the European Central Bank (ECB) Chief Economist Philip Lane’s rejection of Omicron-linked inflation fears also weighs on the EUR/USD prices. “The coronavirus Omicron variant is not turning out to be a factor that will influence the activity levels for the year,” said the policymaker.

On a different page, firmer German and Eurozone IFO numbers joined downbeat US CB Consumer Confidence and Richmond Fed Manufacturing Index to lift the EUR/USD pair. However, the upbeat US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, kept sellers in control.

Elsewhere, global ire towards Russia, on not backing down, joins the downbeat economic forecasts by the International Monetary Fund (IMF) to exert additional downside pressure on the EUR/USD prices.

Against this backdrop, Wall Street closed in red and the US 10-year Treasury yields printed the least daily losses after a four-day downtrend. That said, prices of gold and oil gained.

Moving on, second-tier US data relating to housing and trade may entertain EUR/USD traders but the Fed’s verdict is crucial as markets await March rate-hike hints.

Read: Federal Reserve Interest Rate Decision Preview: Inflation, Omicron and equities

Technical analysis

Although EUR/USD bounces off an upward sloping trend line from late November, a one-week-old resistance line and 20-DMA, respectively around 1.1320 and 1.1345, challenge the quote’s short-term recovery moves.

If at all the major currency pair rises past 1.1345, the 38.2% Fibonacci retracement (Fibo.) of October-November 2021 downside, near 1.1380, will be the key as it holds the gate for the pair’s further rally towards the monthly high of 1.1481.

Alternatively, multiple lows marked since late November highlight 1.1230 as the next support following the EUR/USD pair’s clear downside break of 1.1290.

Should the pair bears keep reins past 1.1230, the year 2021 low near 1.1185 will be in focus.

EUR/USD: Daily chart

Trend: Further weakness expected