EUR/USD strung up just below 1.0800 as markets head into 2023’s last Fed rate call

• The Euro is giving a middling performance on Wednesday, mostly flat against the USD.
• Eurozone Industrial Production missed the mark earlier, as did US PPI figures.
• It’s all eyes on Powell for the Fed’s last appearance of the year.

The EUR/USD is a mixed bag in the mid-week trading session, caught in a tight range between 1.0810 and 1.0775. Euro traders are battening down the hatches alongside the broader market as the Federal Reserve (Fed) prepares to give its final rate call of 2023.

The Fed is set to keep rates steady for the third straight meeting at 5.5%, the Fed’s longest holding pattern since beginning the rate hike cycle in early 2022.

Markets will be leaning heavily into the Fed’s Interest Rate Expectations, also known as the “Dot Plot”, to get a bead on the Fed’s rate cut expectations for 2024.

Investors are broadly hoping for the Fed to begin a rate cut cycle sooner rather than later, with money markets anticipating cuts to begin as soon as the first quarter of 2024, but overeager investors may have let their expectations run far ahead of what the Fed is willing to provide.

Eurozone Industrial Production declined more than expected in October, contracting 0.7% versus the forecast 0.3% decline. The previous month’s figure saw only a slight revision upwards from -1.1% to -1.0%.

US Core Producer Price Index ((PPI) figures for the year ending in November eased back to a more sedate 2.0% versus the expected 2.2%, chipping away at the previous period’s 2.3%, which saw a minor revision down from 2.4%. Easing producer inflation numbers will have a limited impact, as profit-led inflation tends to face consumers at the end-point of the business cycle rather than further up the production chain.

After Federal Reserve Chairman is done making a mess of markets, Thursday will see the European Central Bank (ECB) make its own final appearance of 2023. The whole affair is unlikely to draw near the attention or market jitters that the Fed will. The ECB is broadly expected to maintain a holding pattern with its Main Refinancing Operations Rate 4.5%.

EUR/USD Technical Outlook

Near-term consolidation in the EUR/USD leaves the pair testing into the 200-hour Simple Moving Average (SMA) near the 1.0800 handle as the Euro (EUR) attempts to claw back chart paper from the US Dollar.

The EUR/USD’s recent tumble from November’s peak of 1.1017 sees the pair sticking close to the 200-day SMA on the daily candlesticks, with near-term technical support coming from the 50-day SMA.

EUR/USD Hourly Chart

EUR/USD Daily Chart

EUR/USD Technical Levels