EUR/USD analysis: King Dollar returns by the hand of Fed's Evan

EUR/USD Current price: 1.1553

  • Fed Evans said that the central bank could raise rates one or two more times this year.
  • US July inflation to be out Friday to provide further clues on Fed's future decisions.

Major pairs remained confined to familiar ranges for most of the day, but once again the dollar was the daily winner, appreciating in the US afternoon against all of its major rivals on comments from Fed's Evans, who said that one or two more rate hikes by the end of the year seem "reasonable," while adding that fundamentals remain "extremely strong."  Equities traded mixed, holding no far from their opening levels,  while US Treasury yields edged lower, following softer-than-expected US data. The  Producer Price index rose just modestly in July up 3.3% YoY, missing the market's expectations of 3.4%. The core readings which exclude volatile energy and food prices advanced modestly, up 0.1% MoM and by 2.7% YoY. Weekly unemployment claims decreased to 213K, beating expectations of 220K, although the 4-week average rose to 1.755M from 1.726M. For once, there weren't fresh headlines linked to the US-China trade war, but risk aversion got a push from North Korean headlines, as officers remarked that if the US insists on applying sanctions to the country, it could not expect progress on denuclearization.

This Friday, the US will release July inflation figures, foreseen modestly up and in line with the previous month figures. If the numbers came as expected, it could temporarily weight on the greenback, although once the market realizes that those numbers can't affect Fed's future decisions, the most likely scenario is that the dollar will neutralize losses. Market movements could be larger than usual after a week without relevant data.

The EUR/USD pair is now near its daily low around 1.1550, after failing for a second consecutive day to break above the 1.1620 resistance area, now at risk of re-testing its yearly low and even fell further. The 4 hours chart shows that the pair broke below its 20 SMA, accelerating its decline afterward, while technical indicators head south almost vertically, with the RSI now nearing oversold readings. Should the 1.1500 level give up, the pair could extend its decline down to the 1.1440/60 region, the next relevant static support area.

Support levels: 1.1510 1.1480 1.1440

Resistance levels: 1.1585 1.1625 1.1660     

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