EUR/USD struggling to develop a foothold over 1.0800 as Fed rate call looms ahead

• EUR/USD is up on the day, but paring back gains firmly into familiar levels.
• Near-term momentum is getting hamstrung by major levels.
• Markets are gearing up for the Fed's last showing of 2023.

EUR/USD climbed in early Tuesday trading before slipping back below 1.0800, driven back after US Consumer Price Index (CPI) inflation came in as markets forecast, showing an ongoing gradual easing of price growth in the US.

The Eurozone ZEW Economic Sentiment survey for December came in well above expectations, printing at 23.0 versus the forecast 12.0, vaulting easily over the November print of 13.8.

The Euro (EUR) rose through Tuesday’s early market sessions, tipping the EUR/USD into an intraday high of 1.0828 before getting dragged back down below 1.0800 after US CPI inflation came in as expected.

Read More: Forecasts from 10 major banks, crushing rate cut prospects

Headline US CPI inflation for November printed at 0.1% compared to October’s 0.0%, and annualized headline CPI price growth ticked down slightly from 3.2% to 3.1%.

Core CPI inflation came in at 4% for the year into November, and inflation appears to have been capped off in the US, but inflation continues to ebb slower than most market participants were hoping for.

Global markets wil be turning attention to Wednesday’s Federal Reserve (Fed) rate call. With the US central bank broadly expected to hold rates steady at 5.5%, investors will be paying significant attention to the Fed’s Monetary Policy Statement, as well as updates to the Fed’s Interest Rate Projections, or Dot Plot.

After the mid-week Fed hump will be the European Central Bank (ECB) on Thursday, which will also be delivering its last rate call of 2023 before heading into the new year. 

EUR/USD Technical Outlook 

The EUR/USD remains trapped under the 200-hour Simple Moving Average (SMA) near 1.0820, getting rejected from the intraday significance level to trade on the south side of 1.0800 once again.

The pair has remained in a near-term bearish stance since shedding 1.1000 at the tail end of November, and a bullish rebound has yet to firmly materialize.

Daily candlesticks have the EUR/USD stuck in a congestion zone between the 200-day and 50-day SMAs, at 1.0825 and 1.0716 respectively. Firm technical support rests at the 1.0-700 handle just below current price action.

EUR/USD Daily Chart

EUR/USD Technical Levels