EURUSD Pushing Higher EURUSD is rallying firmly ahead of the FOMC later today. The pair has been on a strong run since the March lows, gaining around 5.5% as narrowing yield spreads between EU and US bonds help lift sentiment. Much of the driver behind the move has been the narrowing of monetary policy divergence between the Fed and the ECB. With the Fed having slowed the pace of its rate hikes this year while the ECB pushed ahead with a further full point of tightening, EUR has strengthened considerably against USD. With both central banks due to make rate decisions over the next two days, there is plenty of room for fresh volatility.Fed in Focus Looking ahead to the Fed later today, the market is widely expecting a further .25% rate hike. However, beyond today’s meeting there is a great deal of uncertainty over how the Fed is likely to act. With recession fears building and banking sector woes simmering away, many players expect the Fed to take a less hawkish view on the coming months. If this proves to be the case, EURUSD looks likely to rally further into the ECB meeting tomorrow. Focus will then be on Lagarde and co. The ECB too is expected to hike by .25%, however there looks to be more room for the ECB to retain a more hawkish outlook than the Fed which, again, if seen, should keep EURUSD well supported near-term.Technical ViewsEURUSDFollowing a steady run off the March lows, the rally has stalled for now into a test of the 1.1126 level. This area remains key resistance though, while within the bull channel which has framed the move off last year’s lows. Should price break current highs, there is room for a bigger move higher towards the 1.1503 level next. To the downside, 1.0785 and the channel lows remains the key support area to monitor.
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