EURUSD has formed higher lows and slightly higher highs to consolidate inside a rising wedge on its hourly time frame. Price is testing the wedge resistance and might be due for another dip to support.

Technical indicators are suggesting that a bounce might be due, as the 100 SMA is above the 200 SMA to reflect bullish pressure. The 100 SMA even lines up with the wedge support to add to its strength as a floor near the 1.0750 minor psychological mark.

Stochastic is pointing down to show that sellers are in control, but the oscillator is dipping close to the oversold region to signal exhaustion. RSI has more room to slide before reflecting exhaustion among sellers, so the selloff might carry on until the oscillator reaches oversold levels.

Sustained selling pressure might spur a break below support and trigger a drop of the same height as the wedge. Similarly a break above the resistance around 1.0825 could set off a rally that’s the same size as the formation.

The upcoming FOMC decision would likely provide additional volatility for EURUSD, as a shift in policy bias could mean big moves for the dollar.

Some are expecting the Fed to sit on its hands for the time being, as the latest batch of CPI figures fell short of estimates. However, it’s also worth noting that the latest NFP report once again beat expectations, so wage pressures could keep inflation elevated.

Another interest rate hike from the Fed could be met with a quick rally for the dollar, although traders are likely to pay closer attention to clues about future rate decisions. Indications that they are inclined to hold in July might mean more downside for the US currency.

On Thursday, it will be the ECB’s turn to announce their rate decision and a 0.25% hike is eyed.