EUR/USD looks supported around 1.1800, focus on the Fed

• EUR/USD trades in a narrow range above the 1.1800 level.
• Germany’s GfK Consumer Confidence surprised to the downside.
• All the attention will be on the FOMC gathering later in the session.

The single currency adds to the weekly recovery vs. the dollar and motivates EUR/USD to extend the recent breakout of the 1.1800 mark on Wednesday.

EUR/USD stays vigilant ahead of the FOMC event

EUR/USD sees its recent upside momentum renewed in response to the inconclusive/cautious stance in the dollar, which prompts some volatility in the US Dollar Index (DXY).

The pair is seen alternating gains with losses so far on Wednesday ahead of the key FOMC meeting due later in the NA trading hours. The broad consensus among investors favours the current status quo from the Committee, although any mention of the potential timing of the QE tapering, views on the current high inflation and prospects of rate hikes sooner than expected are likely to take centre stage.

In the domestic calendar, GfK noted the German Consumer Confidence stayed unchanged at -0.3 in August, coming in short of estimates. In France and Italy, the same gauge eased to 101 and improved to 116.6, respectively, for the month of July.

Later in the US data space and other than the FOMC event, Mortgage Applications, Trade Balance figures and the EIA’s report are also due.

What to look for around EUR

The recovery in EUR/USD met a tough barrier in the low-1.1800s for the time being, coming back from last week’s lows in the 1.1750 zone. As usual in past weeks, price action around the pair is expected to exclusively hinge on dollar dynamics, with the FOMC meeting on Wednesday gathering special attention. On the euro side of the equation, the re-affirmed dovish stance from the ECB (as per its latest meeting) is expected to keep the upside limited in spot despite auspicious results from key fundamentals and the persistent high morale in the region.

Key events in the euro area this week: German GfK Consumer Confidence (Wednesday) – German labour market report/Advanced July CPI, EMU final Consumer Confidence (Thursday) – German, EMU flash Q2 GDP/EMU advanced July CPI (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery in the region. Sustainability of the pick-up in inflation figures. Progress of the Delta variant of the coronavirus and pace of the vaccination campaign. Probable political effervescence around the EU Recovery Fund. German elections. Investors’ shift to European equities in the wake of the pandemic.

EUR/USD levels to watch

So far, spot is up 0.09% at 1.1827 and faces the next up barrier at 1.1841 (weekly high Jul.27) followed by 1.1895 (weekly high Jul.6) and finally 1.1975 (weekly high Jun.25). On the other hand, a breakdown of 1.1751 (monthly low Jul.21) would target 1.1704 (2021 low Mar.31) en route to 1.1602 (November 2020 low).