European currencies are showing subdued dynamics, entering a consolidation phase following their previous advance.
European currencies are showing subdued dynamics, entering a consolidation phase following their previous advance. Earlier, EUR/USD and GBP/USD broke out of their ranges and strengthened; however, the subsequent correction has led both pairs to retest the previously breached upper boundaries of their sideways channels. The current stabilisation near these levels reflects a balance of forces in the market and a wait-and-see stance among participants ahead of the key decision by the Federal Reserve.
The main focus is on the Federal Reserve meeting, including the interest rate decision, the accompanying statement, and the press conference. The market is assessing potential signals regarding the future trajectory of monetary policy, which is limiting activity and restraining the formation of a directional move. Additional influence may come from macroeconomic data from the US, the euro area, and the United Kingdom.
EUR/USD
The EUR/USD pair is consolidating near the previously broken range, holding above key levels. This dynamic preserves a structure favourable for further gains; however, the lack of new drivers is restraining the development of upward momentum. The reaction to the Fed decision may provide the impulse for a breakout from the current range.
Technical analysis of EUR/USD suggests the possibility of a retest of 1.1750, as a bullish engulfing pattern has formed on the daily timeframe. A firm move below 1.1650 could lead to the pair returning to the previously broken range.
Key events for EUR/USD:
- today at 09:00 (GMT+3): speech by Bundesbank’s B. Balz;
- today at 18:30 (GMT+3): speech by Bundesbank Vice President Buch;
- tomorrow at 11:00 (GMT+3): Germany’s gross domestic product.
GBP/USD
The GBP/USD pair is showing a similar structure, holding near its levels after a corrective pullback. The current consolidation reflects market uncertainty and expectations of signals from the Federal Reserve and the outlook for Bank of England policy. Depending on the regulators’ rhetoric, the pair may either resume its advance and firmly establish itself above 1.3600, or deepen the correction and fall below 1.3460.
Key events for GBP/USD:
- today at 17:00 (GMT+3): Atlanta Fed GDPNow indicator;
- today at 21:00 (GMT+3): US Federal Reserve interest rate decision;
- today at 21:30 (GMT+3): FOMC press conference.
Overall, the market is at a point of equilibrium, where previously broken levels act as a key decision zone. The outcome of the Federal Reserve meeting may serve as the main driver: a more dovish tone could support a continuation of the upward momentum in European currencies, while more hawkish signals may increase pressure and lead to a deeper correction.