The Euro bounced yesterday and closed above the 50-day moving average, putting on hold the immediate bearish setup ahead of the very important FOMC rate decision. The Eurozone first quarter GDP and the German inflation figure lifted the common currency up for the third day straight after they both beat market expectations, suggesting that the ECB may not have to rely on the Quantitative Easing policy anytime soon. The FED is expected to keep rates unchanged at 2.25%-2.5% and may put a bid under the US Dollar after the recent improvements in the economy. Today, the EU market is closed for Labour Day. So traders will shift their focus towards the US as it will be releasing key economic events starting with ADP Nonfarm Employment, ISM Manufacturing PMI and last but not least the FOMC rate decision.
The Euro broke through 1.1185 and the 50-day moving average closing the day well above 1.12. Price found some resistance at 1.1230 (R1), a break above this level could likely take the common currency to test the 200-day moving average, 1.1260 (R2). However, any sign of weakness in price action could stop this corrective bounce and take the single currency lower as the trend is still bearish.
Support: 1.1185 / 1.1115
Resistance: 1.1230 / 1.1260 / 1.1280