EUR/USD holds mildly up after US data, Fed looms

• Labor data from April from the US came in mixed and ISM PMIs disappointed.
• The FOMC is anticipated to deliver a hawkish hold, setting a vital economic direction for markets.
• In case the Fed shows itself hawkish, the markets could adjust its expectations further, fuelling additional gains to the USD.

The EUR/USD pair is trading mildly higher at 1.0682, with a daily variation of 0.12% on Wednesday’s session. The US reported soft ISM PMIs and Job Openings figures which seem to be weighing on the Greenback. However, the short-term direction of the pair will be dictated by the Federal Reserve (Fed) decision and messaging later in the session.

The latest data from the US Bureau of Labor Statistics revealed a decrease in Job Openings. In the last business day of March, openings dropped to 8.488M, down from March's revised figure of 8.813M and below the anticipated 8.680 M. Meanwhile, the US manufacturing sector experienced a decline in April, with the ISM Manufacturing PMI falling to 49.2 from 50.3 in March, missing the expected mark of 50.0, indicating a contraction in business activity.

On the positive side, private sector employment showed growth, according to data released by Automatic Data Processing. In April, the sector added 192K jobs, surpassing the forecast of 175K but still below March's revised increase of 208K jobs.

Regarding the Federal Reserve, it is anticipated to maintain a hawkish acknowledging persistent inflation and strong economic indicators. In addition, despite not updating its macroeconomic projections until June, the Fed is expected to point out recent deteriorations in the inflation outlook. Chair Powell's press conference will be crucial, with the potential to drop earlier guidance on easing, signaling a more cautious approach to monetary policy adjustments. Market expectations have shifted, significantly reducing the likelihood of rate cuts in the near future, and pushing the start of the easing cycle towards September of 2024.

EUR/USD technical analysis

On the daily chart, the Relative Strength Index (RSI) stands in negative territory with a recent reading of 44 indicating sustained bearish momentum. This coincides with the bearish atmosphere observed in the past sessions since early April, where all readings remained within the negative territory, none reaching passing above 50, signifying ongoing sellers' dominance in the market. That being said, the Moving Average Convergence Divergence (MACD) shows positive momentum, displaying green bars that currently remain flat which points out that there is some buying action.

However, the EUR/USD is trading below its 20, 100, and 200-day SMA. This implies sustained short-term, intermediate, and long-term selling pressure and as long as the buyers keep the pair below this level the outlook will be bearish.

EUR/USD daily chart