The EURUSD currency pair is trading at interesting levels again - ahead of the FOMC meeting later today. Markets are preparing for a dovish Fed which opens up room for a hawkish surprise from the US central bank. 

 

The fall in the Dollar over the last week and the fact that the currency is staying at those levels is a sign that traders have been preparing for a dovish Fed. However, the Fed doesn’t have that many reasons to be as dovish anymore. The stock market is back up to pre-December levels and the economy is still doing OK, although running at a somewhat slower pace now.

The focus will be on the rate hike dot-plot and the economic projections. In December, they forecasted two more rate hikes for this year, but markets are only expecting one or none. If FOMC members again forecast 2 more rate hikes this year then that will be hawkish and the USD is likely to gain. 

Further, their projections for inflation and GDP will also be closely watched by traders to gauge the hawkishness or dovishness of the Fed's message.

The technicals are also suggesting EURUSD’s easier path from here will be lower as the pair has hit some important resistance around the 1.1350 level. Most importantly, this is where the resistance trendline of the year to date falling channel stands, as well as the 50 and 100 day moving averages (orange and blue lines). 

All of this is shown on the chart below.

 

The current levels offer a good opportunity to enter a short EURUSD position with a relatively tight stop and good potential for larger profit targets.