• Fed Officials hesitance in supporting the rate hike weighs on the US dollar.
• The recent news of Russia responding in writing to US eases the Russia – Ukraine tensions and favors the quote EUR/USD.
• Traders await for the ECB meeting on Thursday.

Euro trades high against the greenback on Tuesday and is trading around intraday high at 1.1240 level. This move of the quote can be linked to the broad US dollar weakness.

The Fed officials sounded cautious on the rate hike on Monday. Fed officials said they felt it was time for the U.S. central bank to begin removing support from an economy that is growing strongly and where inflation is at its highest in four decades.

Despite of the forecasts by Wall Street analysts that five, six or even seven interest-rate hikes will be needed this year, the Fed Officials resisted laying out the kind of clear policy path that markets have come to expect from recent tightening cycles.

“We definitely are poised for a March increase,” San Francisco Fed President Mary Daly told Reuters in a brief phone interview. “But after that, I want to see what the data brings us… let’s get through Omicron, let’s look at this and let’s see.”

“I’d like us to be better positioned,” Richmond Fed President Thomas Barkin told CNBC. “Better positioned is somewhere closer to neutral, certainly, than we are now and I think the pace of that just depends on the pace of inflation.” Fed Chair Jerome Powell said last week that he and fellow U.S. central bankers were “of a mind” to raise interest rates at their March 15-16 meeting as they begin to pare back support for the economy.

Additionally, Atlanta Fed President Raphael Bostic, a non-voter on the Federal Open Market Committee told the Financial Times in an interview over the weekend the Fed could super-size a rate increase to half a percentage point if inflation remains stubbornly high.

Elsewhere, Eurozone GDP reading was mixed with quarter on quarter reading of 0.3% less than the expectation of 2.2% Whereas year on year reading was upbeat with reading of 4.6% beating the expectation of 3.9%.

It is worth noting that recent news about US receiving written letter from Moscow eases the Russia- Ukraine tension to some extent and favors the EUR/USD bulls. As per the news, Moscow’s response comes days after Washington submitted its own documents to Moscow and ahead of a planned phone call between US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov Tuesday. A senior State Department official and a State Department spokesperson confirmed Monday that they “received a written follow-up from Russia.”

Market is waiting for the European Central Bank  meets on Thursday. While no policy change is expected, analysts said the Fed’s looming rate hikes will narrow the ECB’s window for action.

EUR/USD 4 Hour Chart:

Support: 1.1165 (S1), 1.1096 (S2), 1.1055 (S3).

Resistance: 1.1274 (R1), 1.1316 (R2), 1.1384 (R3).

As of now, Euro trades high against the US dollar and the traders are keen to watch the US ISM Manufacturing PMI for January, expected 60.0 versus 58.7 prior for directing their move further. In the meantime, we expect a bullish trend for EUR/USD.