EUR/USD stages sharp U-turn from weekly highs, trades below 1.1800
|- EUR/USD reversed its direction after testing 1.1900 on Thursday.
- FOMC Chairman Powell's remarks triggered sharp fluctuations in DXY.
- Data from US showed that economy contracted by 31.7% in second quarter.
The EUR/USD pair surged to a fresh weekly high of 1.1899 in the early American session but staged a sharp U-turn and dropped into the negative territory. As of writing, the pair was down 0.35% on a daily basis at 1.1788.
DXY settles in the positive territory above 93.00
At his highly-anticipated speech at the Jackson Hole Symposium, FOMC Chairman Jerome Powell announced that the Fed will be adopting average inflation target as part of its new policy strategy. Although the initial reaction caused the USD to come under heavy selling pressure, additional comments from Powell provided a boost to the currency.
Powell noted that the Fed will not tie itself to a particular method to define average inflation and added that any inflation overshoots are expected to be moderate. The US Dollar Index, which slumped to a low of 92.42, was last seen gaining 0.35% on the day at 93.22. A sharp upsurge witnessed in the US Treasury bond yields seems to be helping the greenback preserving its strength. At the moment, the 10-year reference is up nearly 7% on the day.
Meanwhile, the US Bureau of Economic Analysis in its second estimate said that the economy contracted by 31.7% in the second quarter. This reading came in better than the previous estimate of 32.9% and the market expectation of 32.5%.
Later in the session, European Central Bank's (ECB) chief economist Philip Lane will be speaking at the Jackson Hole summit as well.
Technical levels to watch for
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