EUR/USD Boosted by Short-Covering Ahead of Fed Minutes

The Euro is trading higher against the U.S. Dollar on Wednesday after recovering from an early setback. The move suggests short-covering ahead of the announcement of new sanctions against Russia and the release of the minutes of the last Federal Reserve meeting later today.

The single-currency fell earlier in the session to its lowest level in one month against a strengthening dollar as the prospect of new Western sanctions on Russia added pressure to the European currency.

At 12:57 GMT, the EUR/USD is trading 1.0931, up 0.0025 or -0.23%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $101.03, down $0.71 or -0.70%.

Today’s Key Events

The United States and its allies prepared new sanctions on Moscow over civilian killings which President Volodymyr Zelenskiy described as “war crimes”, as heavy fighting and Russian airstrikes pounded the besieged port of Mariupol.

Meanwhile, the Fed will release later in the day at 18:00 GMT minutes of its March meeting that are expected to provide fresh details on its plans to reduce its bond holdings.

Traders are hoping the minutes show the Fed’s intentions at their May monetary policy meeting on whether the widely expected rate hike will be 25 basis points or 50 basis points.

The reaction to the Fed news could be muted, however, because the market may have already priced in the interest rate hikes.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 1.0875 will signal a resumption of the downtrend. A move through 1.1185 will change the main trend to up.

On the upside, the nearest resistance is a 50% level at 1.0972. A second pivot comes in at 1.1030.

Daily Swing Chart Technical Forecast

The direction of the EUR/USD into the close on Wednesday is likely to be determined by trader reaction to 1.0906.

Bullish Scenario

A sustained move over 1.0906 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into 1.0972. Overcoming this level will put the EUR/USD in a position to challenge the next 50% level at 1.1030.

Bearish Scenario

A sustained move under 1.0906 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the low of the session at 1.0875.

Taking out 1.0875 could trigger an acceleration to the downside with the March 7 main bottom at 1.0806 the next key target.

Side Notes

A close over 1.0875 will form a potentially bullish closing price reversal bottom. If confirmed, this could lead to the start of a 2 to 3 day counter-trend rally.