EUR/USD ticks into new multi-year high as Fed rate calls looms large

• EUR/USD rose a scant 0.2% on Tuesday, testing 1.0950.
• Markets are tilted risk-on despite a high-impact Fed rate call on the cards.
• An update to the Fed's own interest rate projections is due on Wednesday.

EUR/USD rose slightly on Tuesday, climbing one-fifth of one percent to continue testing the 1.0950 region. Fiber clipped into a fresh 23-month high as broad-market risk appetite tilts firmly risk-on ahead of the Fed's upcoming rate call on Wednesday. Final European Harmonized Index of Consumer Prices (HICP) figures are also due on Wednesday, though the final print is expected to show no material change from the preliminary print. European Central Bank (ECB) President Christine Lagarde will be making an appearance on Thursday, as the EU leaders' summit gets underway during the back half of the trading week.

Forex Today: Fed expected to keep rates unchanged

The Federal Reserve (Fed) is set to announce its latest interest rate decision on Wednesday. The CME's FedWatch Tool indicates that market participants largely expect the Fed to maintain its current rate for the next two meetings, with a potential quarter-point rate reduction anticipated at the Federal Open Market Committee (FOMC) meeting in June. This week, the FOMC will also release its updated interest rate forecasts, which could significantly alter expectations for rate cuts if the Fed policymakers' outlook on interest rates diverges significantly from existing market predictions.

EUR/USD price forecast

From a technical viewpoint, the Stochastic Oscillator is currently in overbought territory above 80.00, though it is showing signs of flattening, indicating a reduction in bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) displays flat green bars, suggesting a lack of strong trend conviction. Collectively, these indicators imply that the pair may enter a consolidation phase prior to making a definitive move.

Looking ahead, resistance is positioned at the 1.1000 level, which has historically served as a significant barrier. On the downside, initial support can be found around 1.0850, with more substantial support near the 20-day moving average close to 1.0800. A decline below these thresholds could trigger a corrective reaction, while consistent trading above 1.0900 would maintain the overall bullish outlook.

EUR/USD daily chart