Euro-Dollar Holds as Traders Await Fed and ECB Signals

Key Moments

Consolidation in EUR/USD Ahead of Central Bank Meetings

The EUR/USD pair is trading in a narrow band around 1.1700 during the Asian session on Wednesday, remaining within Tuesday’s price range. The currency pair has shown little directional bias as market participants wait for monetary policy decisions from the Federal Reserve (Fed) and the European Central Bank (ECB), scheduled for Wednesday and Thursday, respectively.

Market expectations point to both the Fed and the ECB keeping policy rates steady at current levels. However, policymakers are anticipated to emphasize persistent upside risks to inflation, linked in part to elevated energy costs associated with the prolonged closure of the Strait of Hormuz.

Investors will scrutinize remarks from Fed Chair Jerome Powell and ECB President Christine Lagarde for any indication that their institutions are actively considering tighter financial conditions in the near term.

German Inflation Data in Focus Before Fed and ECB Decisions

Ahead of the central bank announcements, attention turns to the preliminary German Harmonized Index of Consumer Prices (HICP) for April, due at 12:00 GMT. Consensus projections suggest that German annual inflation increased to 3% Year-on-Year (YoY), compared with 2.7% in March.

EUR/USD Technical Landscape

As of writing, EUR/USD is trading flat around 1.1700. The pair is exhibiting a sideways pattern, with price action clustered around the 20-day exponential moving average (EMA) at 1.1698, while remaining above the 38.2% Fibonacci retracement level at 1.1666.

The Relative Strength Index (RSI) has moved back into the 40.00-60.00 band after failing to stay above 60.00 for an extended period. This signals fading bullish momentum, though the overall upward bias has not yet been invalidated.

On the upside, the 50.0% Fibonacci retracement around 1.1745 is the first notable resistance, followed by the 61.8% retracement near 1.1825. Above these levels, additional barriers are seen at 1.1938 and near the cycle high around 1.2082.

On the downside, the 38.2% Fibonacci retracement at 1.1666 forms the initial support area. A clear move below this zone would open the door toward deeper supports at the 23.6% Fibonacci level around 1.1567 and the structural base near 1.1408.

German HICP: Definition and Market Implications

The Harmonized Index of Consumer Prices (HICP), released monthly by the German statistics office Destatis, measures inflation using a standardized methodology applied across all European Union (EU) member states, enabling cross-country comparisons. The Year-on-Year (YoY) figure compares price levels in the reference month with those from the same month a year earlier. In general, a higher-than-expected HICP reading is considered supportive for the Euro (EUR), while a lower figure is typically viewed as negative.