• The euro attempts to return above 1.1000 after its reversal from 1.1040 area.
• The pair is trading sideways with the market awaiting the Fed's statement.
• EUR/USD could drop to 1.08 on the back of a hawkish Fed – Scotiabank.

The common currency’s pullback from session highs at 1.1040 has been contained at 1.0990, and the pair is  now trying to return above 1.1000 with the investors awaiting the release of the Fed’s monetary policy decision.

The euro is hovering around 1.1000 with all eyes on the Fed

The pair remains trading sideways within a tight range around 1.1000 in a rather quiet session as the market braces for the first Federal Reserve’s rate hike since 2018.

The brighter risk sentiment has been supportive to the euro during the previous sessions, and has fuelled a moderate rebound from Tuesday’s lows at 1.0925.

Some positive comments on the Eastern European crisis by Russian and Ukrainian representatives have boosted optimism about a cease-fire, while earlier on Wednesday, the announcement that China is planning to roll out a new set of economic stimulus measures has boosted market mood, which has supported the euro against safer assets like the US dollar.

A hawkish Fed might send the euro to 1.08 – Scotiabank

Scotiabank’s FX analysis team, however, is skeptical about the euro’s near-term uptrend and warns about a bearish reaction to Fed’s statement: “A more hawkish than expected decision should pull EUR/USD under the 1.09 mark toward a re-test of 1.08 over the balance of the week, while a cautious hike could see the pair aim for a test of 1.11 – although we think the trend remains negative with the Fed set to generally meet market expectations through 2022.”

Technical levels to watch