EUR/USD has been pivoting around the 1.13 level since mid-November. In the view of economists at Rabobank, it is likely that the direction of the pair in the short term will be taken from the tone adopted by Fed Chair Powell in his post FOMC meeting press conference today. 

Current long USD positions will continue to leave EUR/USD vulnerable to pullbacks

“Given the recent volatility in stocks and concerns about the impact of tighter Fed policy on EM, there is some speculation in the market that Powell could soften his tone today and that the FOMC could throw its weight behind 3 rather than 4 rate rises this year. This outcome would likely undermine USD sentiment and trigger another push higher in EUR/USD.” 

“Overall, current long USD positions will continue to leave EUR/USD vulnerable to pullbacks. However, given the continued divergence in Fed and ECB policy in addition to the potential support to the USD from safe-haven flows, we would favour selling rallies in EUR/USD with the view that the USD can strengthen further into the middle of the year.”

See – Fed Preview: Forecasts from 14 major banks, building a March hike