EUR/USD struggles for direction in the 1.1300 region, Fed in sight

• EUR/USD trades within a tight range around the 1.1300 zone.
• The FOMC is expected to strike a hawkish tone at its meeting.
• German 10y Bund auction, French labour market report next of note.

The single currency remains depressed for yet another session and puts EUR/USD under further pressure around the 1.1300 neighbourhood.

EUR/USD looks to Fed for direction

EUR/USD trades in the negative territory for the third session in a row on Wednesday amidst a broad-based cautious note ahead of the key FOMC event due later in the NA session.

The persevering offered stance in the pair comes in response to the continuation of the recovery in the dollar, although this trend seems to have been losing momentum in past hours against the backdrop of inconclusive direction in US yields.

The immediate catalyst for the pair’s price action comes from the FOMC meeting due later in the European evening, while geopolitical tensions stemming from the Russia-Ukraine conflict continues to drive the macro sentiment in the global markets.

In the domestic calendar, Consumer Confidence in France eased a tad to 99 in January, while Unemployment Benefit Claims are due later seconded by the German 10y Bund Auction.

Across the pond, weekly MBA Mortgage Applications are due followed by December’s flash Goods Trade Balance and New Home Sales.

What to look for around EUR

EUR/USD seems to have met a tough barrier in the area below 1.1500 in mid-January, sparking a corrective downside soon afterwards in tandem with the strong recovery in the greenback. Moving forward, there is not much optimism around the pair, particularly in light of the Fed’s imminent start of the tightening cycle vs. the accommodative-for-longer stance in the ECB, despite the high inflation in the euro area is not giving any things of cooling down for the time being. On another front, the unabated advance of the coronavirus pandemic remains as the exclusive factor to look at when it comes to economic growth prospects and investors’ morale in the region.

Key events in the euro area this week: Germany GfK Consumer Confidence (Thursday) – Germany Advanced Q4 GDP, EMU Final Consumer Confidence.

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. ECB stance/potential reaction to the persistent elevated inflation in the region. ECB tapering speculation/rate path. Italy elects President of the Republic in late January. Presidential elections in France in April.

EUR/USD levels to watch

So far, spot is losing 0.11% at 1.1288 and faces the next up barrier at 1.1369 (high Jan.20) seconded by 1.1464 (100-day SMA) and finally 1.1482 (2022 high Jan.14). On the other hand, a break below 1.1263 (2022 low Jan.25) would target 1.1221 (monthly low Dec.15 2021) en route to 1.1186 (2021 low Nov.24).