EUR/USD analysis: pierces 1.2000 on persistent dollar's strength

Valeria Bednarik FXStreet

EUR/USD Current price: 1.2003

Fed's monetary policy meeting not expected to be a shocker, but will probably make a big noise.
EUR/USD extremely oversold, although the slide could continue.

The dollar is once again the overall winner, extending its gains to multi-month highs against most of its major rivals. The EUR/USD pair traded as low as 1.1985 before settling around the 1.2000 level, in spite of disappointing US data and on the back of resurgent yields. Thin volumes all through the day exacerbated dollar's momentum, as most of the world was on holidays, celebrating the Labour Day, with the exception of the US and the UK, with both markets opened. There were no macroeconomic releases coming from the EU, while US figures disappointed with the final Markit Manufacturing PMI matching previous estimate with 56.5 for April, but the ISM Manufacturing PMI came in at 57.3, below market's expectations of 58.3 and the previous 59.3. Also, US Construction Spending fell in March 1.7% vs. an expected 0.5% advance.

As the FOMC starts its two-day meeting, US Treasury yields rose, underpinning the greenback ahead of Wednesday's announcement. The central bank is largely expected to leave its monetary policy unchanged, but a change in the rhetoric is not out of the table. Market players are largely anticipating a more aggressive stance amid the latest solid macroeconomic data. Ahead of the event, the EU will see the release of the final versions of the Markit Manufacturing PMI and more relevant, the EU Q1 preliminary GDP figure.

The EUR/USD pair is extremely oversold, but intraday technical readings continue favoring the downside, as the price accelerated south further below a firmly bearish 20 SMA, while technical indicators remain well into negative territory, with the RSI trying to recover some ground, but currently at around 22. At this point is all about the Fed and how the market takes the statement. Beyond the announcement, and particularly if it's not a shocker, an upward correction is likely, with sellers probably taking their chances at higher levels, with April low at 1.2054 being now the immediate resistance.

Support levels: 1.1985 1.1950 1.1920

Resistance levels: 1.2055 1.2090 1.2120

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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