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The EUR/USD pair slipped to the key support at 1.0795 on Monday. This was a crucial level because it was the first support of the Woodie pivot point and the lower side of the descending channel. The pair formed a small hammer pattern, a popular bullish sign.
The EUR/USD exchange rate reacted mildly to Tuesday’s US consumer confidence and European GDP numbers as the focus remained on the upcoming Federal Reserve decision. The pair was still hovering at 1.0835, where it has been stuck at in the past few days.
Fed decision ahead
The EUR/USD pair moved sideways after Eurostat published better-than-expected economic numbers on Tuesday. The report revealed that the economy avoided a recession narrowly in Q4 as it stagnated. It expanded by 0.1% on a YoY basis, higher than the expected 0.0%. In Spain, the economy expanded by 2.0% in Q4 while in France, it rose by just 0.7%.
The other important data came from the United States, where the Conference Board published this month’s consumer confidence data. The agency revealed that confidence rose from 108 in December to 114.8 in January, lower than the expected 115. This report confirmed what a separate one by Michigan University said mid-this month.
Meanwhile, the number of job openings rose to 9.02 million from the previous month’s 8.92 million. This is a sign that the labor market in the US is still tight. Meanwhile, house prices continued rising in November. The house price index rose by 0.3% and 6.6% on a MoM and YoY basis, respectively.
These numbers came as the Fed started its two-day meeting. In it, most economists expect that the bank will leave rates unchanged between 5.25% and 5.50%. While the Fed pointed to three cuts this year, some analysts are questioning whether these cuts are necessary since the economy is still strong.
The Fed decision will come a week after the bank decided to leave interest rates unchanged. In her statement, Christine Lagarde said that the bank will likely hold rates higher for longer and then start cutting later this year.
The key economic numbers to watch on Wednesday will be the upcoming ADP jobs report and German flash inflation figures.
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EUR/USD technical analysis
The EUR/USD pair slipped to the key support at 1.0795 on Monday. This was a crucial level because it was the first support of the Woodie pivot point and the lower side of the descending channel. The pair formed a small hammer pattern, a popular bullish sign.
It has now retested the 50-period Arnaud Legoux Moving Average (ALMA) and the Woodie pivot point. Therefore, the outlook for the pair is bearish since the Fed will likely sound a bit hawkish in this meeting. Besides, the economy is doing well, recession risks have subsided, while stocks have surged to record highs.
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