EUR/USD Analysis: Post-FOMC USD crash helped break through key technical barriers

Haresh Menghani FXStreet

The US Dollar extended its weakening trend on Wednesday and tumbled to its lowest level since early February after the Fed indicated there will be no more rate hikes in 2019. The central bank also downgraded its economic outlook and said the unwinding of its balance sheet would end in September. The Fed's outlook turned more dovish than previously expected and prompted some aggressive USD selling pressure, helping the EUR/USD pair to build on its recent recovery move from over 20-month lows set earlier this month.

The pair finally broke through 100-day SMA barrier and took along medium-term trading stops placed at near six-month-old descending trend-line resistance, around the 1.1400 handle. The pair rallied to six-week tops, albeit the bullish momentum paused near mid-1.1400s, a resistance marked by 50% Fibonacci retracement level of the 1.0341-1.2556 strong up-move. With the greenback still nursing the overnight losses, the pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band through the Asian session on Thursday.

Moving ahead, today's release of the ECB Economic Bulletin might influence the shared currency during the European trading session. From the US, the releases of Philly Fed Manufacturing Index and initial weekly jobless claims will be looked upon for some immediate respite for the USD bulls and further collaborate towards producing some meaningful trading opportunities later during the early North-American session.

Meanwhile, the technical picture now seems to have shifted in favour of bullish traders, though overbought conditions on hourly charts now seemed to be the only factor keeping a lid on any subsequent up-move. However, a convincing move beyond the mentioned hurdle now seems to lift the pair further towards challenging the very important 200-day SMA, just ahead of the key 1.1500 psychological mark. A follow-through buying will add credence/reinforce the constructive set-up and lift the pair further towards YTD tops, around the 1.1570 region.

On the flip side, the descending trend-line resistance break-point, around the 1.1400 handle, now seems to protect the immediate downside and is followed by 100-day SMA near the 1.1375-70 region. Failure to defend the mentioned supports might prompt some long-unwinding trade and turn the pair vulnerable to head back towards challenging the 1.1300 handle with some intermediate support near the 1.1340-35 zone.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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