EUR/USD Price Analysis: Recovery Below 1.0700 as Markets Await Fed Meeting

The EUR/USD pair is showing signs of recovery, trading near the 1.0670 level during the early European trading hours on Monday. However, the upside for this major currency pair appears to be limited as investors shift their focus to the upcoming Federal Reserve (Fed) interest rate decision scheduled for Wednesday.

In recent weeks, the EUR/USD pair experienced losses, but it now seems to be stabilizing as traders brace for the Fed’s monetary policy decision. The market’s anticipation of this event has played a significant role in influencing the pair’s recent movements.

Notably, key economic data from the United States has indicated healthy economic conditions over the past week. This data has led some analysts and investors to believe that the Fed may consider one more interest rate hike by the end of 2023. However, the market sentiment currently leans toward the Fed skipping a rate hike in September. According to the CME FedWatch tool, the odds of a 25 basis point (bps) rate hike at the November meeting have also declined to 27%.

The upcoming Fed meeting will be closely watched by market participants, and any hints or guidance provided by the central bank could lead to significant movements in the EUR/USD pair. Traders will be looking for clues about the Fed’s stance on interest rates, inflation, and the overall economic outlook.

In conclusion, the EUR/USD pair is in a recovery phase but faces limitations in its upside potential as the market eagerly awaits the Fed’s decision. The dynamics of this major currency pair will likely be shaped by the outcome of the Fed meeting and the central bank’s guidance on future monetary policy. As such, traders and investors will be keeping a close eye on this event as it unfolds later in the week.