Forex - EUR/USD moves sideways as markets brace for Fed decision

The dollar traded sideways to higher against the euro on Thursday as investors jumped to the sidelines to await the Federal Reserve's decision next week on the fate of its monthly USD85 billion bond-buying program.

In U.S. trading on Thursday, EUR/USD was down 0.08 % at 1.3299, up from a session low of 1.3258 and off from a high of 1.3324.

The pair was likely to find support at 1.3105, Friday's low, and resistance at 1.3280, Monday's high.

The dollar strengthened on expectations that the Federal Reserve will announce plans to taper its USD85 billion in monthly asset purchases at its Sept. 17-18 meeting.

Stimulus tools such as Fed asset purchases weaken the dollar by driving down borrowing costs, and talk of their dismantling can strengthen the greenback.

Further fueling talk of less dovish Federal Reserve were better-than-expected weekly jobless figures.

The Department of Labor said earlier that the number of individuals filing for initial jobless claims in the U.S. fell by 31,000 to 292,000 from 323,000 in the previous week.

Analysts were expecting the number to rise by 7,000 to 330,000, though the report said the decline was largely due to two states not processing all of their claims because of computer upgrades.

Capping the dollar's gains, however, were expectations that the Fed will only slightly cut the amount of bonds it purchases each month.

The euro meanwhile, slid against the dollar after data revealed that industrial production in the euro area fell by 1.5% in July, the biggest drop in a year. 

Analysts were expecting a 0.1% decline. 

On a year-over-year basis industrial production fell 2.1% to the lowest level since April 2010, compared to expectations for a 0.1% decline.

Elsewhere, the euro was down against the pound and down against the yen, with EUR/GBP trading down 0.01% at 0.8413 and EUR/JPY trading down 0.63% at 132.14.

On Friday, the U.S. will release data on retail sales, producer price inflation and preliminary data from the University of Michigan on consumer sentiment.