EUR/USD Forecast: Euro looks strong before Fed’s decision

• Euro outperforms on Tuesday as the market considers the ECB might hike further if needed. 
• FOMC meeting kicks off, with most forecasts seeing a 25 bps rate hike. 
• EUR/USD rises for the fourth consecutive day, past 1.0750. 

The EUR/USD continues to move higher, consolidating past previous monthly highs in the 1.0760 area. The Euro peaked at 1.0787 on Tuesday, the highest intraday level in a month, before trimming some daily gains as the US Dollar recovered momentum amid higher yields. 

The FOMC started its two-day meeting on Tuesday. The Fed is expected to raise rates by 25 bps; however, there are also calls for a no change and even for a rate cut. Ahead of the meeting, market sentiment improved further and US yields hit two-day highs. The DXY ended flat while the Euro outperformed, as analysts see the European Central Bank (ECB) in a position to raise interest rates again if needed. 

Regarding economic data, in the US, Existing Home Sales jumped 14.5% in February, above the 5% of market consensus, and the Philadelphia Fed Non-Manufacturing Index dropped to -12.8 in March. Across the Atlantic, the German ZEW Survey of the Current Situation unexpectedly dropped to -46.5. 

For the time being, economic indicators are being overshadowed by the Fed preview and the banking crisis. However, the situation appears to be improving, helping the EUR/USD move further to the upside. On Wednesday, the key driver will be the FOMC meeting, so traders should expect large price swings during the American session. Prior to the event, some consolidation seems likely. 

EUR/USD short-term technical outlook 

The Euro continues to move north from the 100-day Simple Moving Average (SMA), currently at 1.0575. The pair approached the 1.0800 area before losing strength. Technical indicators look biased to the upside, particularly if the Euro holds above 1.0750. The daily close on Wednesday, after the Fed, could be relevant: above 1.0770 would point to more gains, while under 1.0660 would keep the door open for another test to 1.0510/20. 

The 4-hour chart shows price moving around 1.0760, with the RSI near the 70 limit, which could suggest some consolidation ahead. The chart favors the upside. A slide below 1.0720 would alleviate the bullish pressure. The key support for the bulls is around the 1.0660/75 area, where an horizontal level, a short-term trendline and the 55-, 100- and 200-period SMAs converge. A break below should leave the Euro vulnerable for a slide toward 1.0600. 

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