EUR/USD headed for another daily close around 1.12

Just as it did on Monday, the EUR/USD pair moved sideways within a tight 40-pip range on Tuesday as well, as investors chose to remain on the sidelines ahead of Wednesday's FOMC monetary policy decisions. As of writing, the pair is trading at 1.1210, up only 6 pips on the day.

• Forex today: expecting a dovish hike to come from the Fed this week?

Although the U.S. Federal Reserve is widely expected to raise its benchmark interest rate by 25 basis points tomorrow, participants will be focused on the details of its previously announced plan to shrink its $4.2 trillion portfolio of Treasury debt and mortgage-backed securities. Michael Pearce, an economist at Capital Economics, "If the Fed is serious about reducing the size of its balance sheet this year and wishes to communicate those plans well in advance, it is running out of time to do so," told Reuters on Wednesday.

• Fed: Market prices a 25bp rate hike - SocGen

The economic calendar will feature the CPI from Germany and the Industrial Production and Employment Change from the euro area ahead of the Retail Sales and the CPI figures from the United States. However, none of these data are expected to cause any sharp fluctuations.

Technical outlook

FXStreet analyst Valeria Bednarik suggests that the downside potential of the pair is well-limited as long as the price holds above the 1.1120 region, where buying interest surged during the past three weeks, but further gains will only be confirmed on a break above 1.1300. She further adds that in the 4 hours chart, the price remained unable to advance above its 100 SMA, but stands a few pips below it and hovering around a bearish 20 SMA, whilst technical indicators stand flat around their midlines, reflecting the ongoing absence of directional strength.

1.1160, 1.1120, and 1.1080 could be seen as technical supports and resistances align at 1.1250, 1.1300, and 1.1345, according to the analyst.

• EUR/USD scope for a test of 1.1130 – UOB
• EUR/USD still struggling below 1.1300 – Commerzbank