EUR/USD Forecast: Lifeless as the Federal Reserve’s announcement looms

EUR/USD Current price: 1.0675

• The ADP survey showed the private sector added 192K new positions in April.
• Market players await the Federal Reserve’s monetary policy announcement.
• EUR/USD trades with a bearish tone below the 1.0700 mark.

Financial markets are pretty quiet this Wednesday, as most markets remain closed amid the Labor Day holiday. However, such quietness will be broken in the American session, as not only does the United States (US) celebrate Labor Day on a different date, but the Federal Reserve (Fed) will announce its decision on monetary policy.

The EUR/USD pair fell to 1.0648 during Asian trading hours, later recovering towards the 1.0670 price zone, where it stays as American traders approach their desks. Wall Street closed in the red on the last trading day of April and kicked off the new month with a soft tone, as futures remain under selling pressure. Fears arose Tuesday after the US reported labor costs rose sharply in the first quarter of the year.

Ahead of the Fed’s announcement, the US released the ADP Survey on private job creation. The report showed that 192K new positions were added in April, which was above March’s increase of 184K and better than the 175K expected. The country will soon release the April ISM Manufacturing PMI, foreseen at 50, after printing at 50.3 in March. Also on the docket is the JOLTS Job Openings report for March and the S&P Global Manufacturing PMI, expected to be confirmed at 49.9.

As for the Fed, the central bank is widely anticipated to maintain rates on hold and deliver a hawkish message, given mounting inflationary pressures. A new factor, however, has appeared: economic growth has not been as solid as previously estimated. The latest macroeconomic data may impact Fed officials, although how they will react is unclear.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for EUR/USD indicates the risk skews to the downside. The pair develops far below bearish moving averages, with the 20 Simple Moving Average (SMA) providing dynamic resistance at 1.0710. At the same time, the Momentum indicator is losing its bullish slope while developing below its 100 line, suggesting limited buying interest. Finally, the Relative Strength Index (RSI) indicator consolidates around 42, supporting the bearish case.

In the near term, and according to the 4-hour chart, EUR/USD is poised to extend its slide. The pair develops below firmly bearish moving averages, with the 20 and 100 SMAs converging around the 1.0700 level. Furthermore, technical indicators resumed their slides within negative levels after a short period of consolidation, in line with a new leg south. Additional declines are likely on a break below 1.0640, the immediate support level.

Support levels: 1.0640 1.0600 1.0565

Resistance levels: 1.0710 1.0745 1.0790