The EURUSD pair showed pronounced dynamics on Tuesday, July 27, breaching the upper bound of a month-long downtrend, then breaking out of the 1.1831 resistance level and reaching 1.1841, with a retracement to the July 15 high. In the upshot, the key pair ended the day slightly in the red, near 1.1816.

Upside in the single currency was driven by lackluster US macro releases. Durable goods orders rose only 0.8% in June, while the median forecast called for 2.1%. Capital goods orders also fell short of expectations, up 0.5% vs. 0.7% expected. The May S&P/Case-Shiller national home price index came in slightly better than expected, up 17.0% YoY ahead of the projected 16.4%, although this failed to prop up the greenback.

On Wednesday, EURUSD has been drifting smoothly downward, dropping to 1.1805, then retracing from above to the previously breached upper bound of the descending channel. The pair can be expected to see sluggish trading until this evening, when a key event is scheduled – the Fed's interest rate decision. Needless to say, rates will remain unchanged, but FX players are advised to zero in on Fed Chair Powell’s post-meeting statement, in which the US regulator may drop some hints about its future tapering timeline.

We see two possible options, depending on how hawkish the Fed's narrative is this evening. One would be a retracement to the descending channel, and a decline to 1.1751. Conversely, we could see another breakout at 1.1831 followed by a leg up to 1.1881.

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