EUR/USD holds comfortably above 1.0600 amid softer USD, focus remains on FOMC decision

• EUR/USD lacks any firm intraday direction and remains confined in a range on Wednesday.
• The underlying bearish sentiment surrounding the USD seems to act as a tailwind for the pair.
• Investors look to the FOMC decision for some impetus ahead of the ECB meeting on Thursday.

The EUR/USD pair struggles to gain any meaningful traction on Wednesday and oscillates in a narrow band through the first half of the European session. Spot prices, however, manage to hold comfortably above the 1.0600 mark and remain well within the striking distance of over a five-month peak touched on Tuesday.

The US Dollar languishes near its lowest level since late June amid expectations for a less aggressive policy tightening by the Fed and acts as a tailwind for the EUR/USD pair. The softer-than-expected US consumer inflation figures released on Tuesday cemented market bets for a relatively smaller 50 bps Fed rate hike at the end of a two-day meeting later this Wednesday. This, in turn, keeps the US Treasury bond yields depressed, which, along with a stable performance around the equity markets, weighs on the safe-haven buck.

Market participants, however, seem nervous and prefer to wait for policymakers' views on signs of easing inflationary pressures in the US. This is lending some support to the Greenback and capping the upside for the EUR/USD pair, at least for the time being. Hence, the market focus will remain glued to the highly-anticipated FOMC decision, due to be announced later during the US session. Apart from this, investors will take cues from the accompanying policy statement and the so-called dot plot for clues about the Fed's rate-hike path.

The outcome will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the EUR/USD pair. The focus will then shift to the European Central Bank (ECB) meeting on Thursday, which should help determine the next leg of a directional move for the major. Heading into key central bank event risks, traders might refrain from placing fresh bets, supporting prospects for an extension of the subdued/range-bound price action.  Nevertheless, both the fundamental and technical backdrop seems tilted in favour of bulls.

Technical levels to watch