EUR/USD clocks fresh weekly highs at 1.1235 ahead of Fed

• Dollar index grinds lower ahead of Fed, pushes EUR/USD northwards.
• Fed’s hawkish tilt to drag the pair back to 1.1175 levels?

EUR/USD extends its corrective bounce from YTD lows of 1.1111 into a fourth straight day today, now flirting with fresh weekly tops reached at 1.1235 last minutes.

Amid holiday-thinned market conditions and a lack of fresh fundamental drivers, the spot remains at the mercy of the US dollar dynamics. A typical pre-Fed decision caution trading prevails in the greenback across its main competitors, leaving the USD index weaker near 97.50 region.

Markets expect the US central bank to keep the Fed Fund rates unchanged at 2.25%-2.5% while anticipating a slightly hawkish tone, given the recent improvement in the US fundamentals. Hence, the major could drop back towards the former resistance-turned-support at 1.1176 levels on a hawkish tilt.

If the Fed disappoints the hawks and conveys a dovish tone or hints towards a rate cut, the EUR/USD pair could extend the correction towards the 1.1324.

“A bullish reversal above 1.1324 (April 17 high), however, will likely remain elusive, as the Fed has little room to turn dovish by dropping rate hike hints, given the sustained labor market strength and record highs in stocks,” Omkar Godbole, FXStreet’s Analyst noted earlier today.

In the meantime, the US macro news will be closely eyed, including the US ADP jobs and ISM manufacturing PMI reports, for near-term trading impetus, as markets digest the latest dovish comments delivered by the ECB Vice-President de Guindos.

EUR/USD Technical Levels