EUR/USD, unable to breach 1.1000, pulls back to 1.0950 area

• The euro fails to break above 1.1000 for the second consecutive day.
• The US dollar is trimming daily losses with the focus shifting to the Fed's meeting.
• EUR/USD might decline towards 1.05 over the coming months – BofA.

The euro is losing ground on Tuesday’s US trading session after failing to extend beyond the 1.1000 level for the second day in a row. The pair is giving away earlier gains and remains barely changed on the daily chart, trading right above 1.0950.

 The euro loses steam with all eyes on the Federal Reserve

The common currency is losing momentum with the greenback picking up as the market braces for Wednesday’s Federal Reserve’s monetary policy decision. With consumer inflation at levels not seen in decades, The Fed is poised to hike rates for the first time in three years, which is providing some support to the USD.

Earlier today, the euro has gone through a modest appreciation, favored by the sustained reversal on oil prices and the moderate optimism regarding the Russia – Ukraine peace talks. The pair, however, has been capped right above 1.1000 before returning to the mid-range of  1.0900.

EUR/USD could extend its decline towards 1.05 – BofA  

In the longer-term, the Bank of America Global Research sees the euro extending its downtrend over the coming months: “Initiation of Fed hiking cycles has typically not boded well for USD prospects, but a hawkish Fed tone amid high inflation risks could end up supporting the dollar for a while longer if terminal rate expectations continue to rise against the backdrop of persistent risk aversion and high commodity prices related to the war in Ukraine (…) We recently downwardly-revised our EUR/USD forecast to 1.05 and continue to see downside potential over a short to medium-term horizon.”

Technical levels to watch