EUR/USD bounces back towards 1.1650, Fed eyed

• Notable USD demand in Asia.
• MonPol divergence back in play.
• FOMC to boost the hawks?

The EUR/USD pair is seen making minor recovery attempts on 1.16 handle, as we progress towards the European opening bells, with the broad-based USD recovery seen faltering once again near 94.60 levels.

EUR/USD: FOMC in spotlight

The spot reversed most losses, having found fresh bids at Tuesday’s low of 1.1625 levels, as the European traders resume covering their  ECB decision-driven EUR shorts heading towards the key risk event for today, the FOMC policy outcome.

More so, fresh selling seen in the US dollar across its main competitors, despite strengthening Treasury yields, also collaborate the rebound seen in the EUR/USD pair. The USD index eases back below 94.50 levels, almost unchanged on the day.

However, further recovery in EUR/USD appears limited, as the demand for the greenback could return to markets on a hawkish Fed statement, with the Dec rate hike already price-in by the markets.

In the meantime, the pair will get influenced by the sentiment on the European stocks and US dataset slated for release later on Wednesday.

EUR/USD Technical Levels

Jim Langlands at FX Charts notes, “the 4-hour charts still suggest that this is a possibility so I would be cautious but overall as long as we don’t see a daily close above 1.1700, I prefer to trade from the short side. In the longer term, with the head shoulder trade now fully in play, the target is at around 1.1250, and with the longer term momentum indicators pointing lower I still think we will head in this direction, and to add to the position into any near-term strength. Back below 1.1600 will find strong support at 1.1575 and then again at 1.1510.”