EUR/USD analysis: Powell pours cold water on dollar bears

EUR/USD Current Price: 1.1195

• The US Federal Reserve left rates unchanged as expected, cuts IOER on 'technical adjustment.'
• Fed's Chief Powell reaffirmed the central bank's current stance, says global risk somehow eased.

Softer-than-expected US data has sent the EUR/USD pair further higher ahead of the most relevant event of the day, the Fed's monetary policy decision. The pair reached 1.1249, underpinned by soft US manufacturing output, as the official ISM Manufacturing PMI resulted in 52.8 in April, missing the market's forecast of 55.0 and below the previous 55.3. On a positive note, although not enough to lift the dollar, the ADP survey showed that the private sector added 275K new jobs in April, largely surpassing the expected 180K. March reading was upwardly revised to 151K.  The pair extended its advance with the Fed's decision, as the central bank kept rates unchanged, but cut the interest rate on excess reserves to 2.35% vs. 2.40% prior. Despite being a technical move aim to keep Fed funds within the range, market players didn't like it. The EUR/USD pair extended its advance to 1.1264, ahead of Powell's speech. The head of the central bank triggered a nice U-turn in sentiment toward the dollar, as he insisted on blaming Q1 soft inflation to temporal factors. Furthermore, he clarified that the IOER cut doesn't reflect in the monetary policy stance, while indicated that global risks have somehow decreased, mentioned progress in US-China trade talks and Brexit being pushed off. The pair lost the 1.1200 level as the press conference developed.

This Thursday, Markit will release the final versions of the April manufacturing PMI for the Union, not expected to suffer relevant revisions. For the EU, the flash estimate stands at 47.8. The US will release April Challenger Job Cuts, weekly unemployment figures and preliminary Nonfarm Productivity and Unit Labor Cost, all of them relevant ahead of the Nonfarm Payroll report to be out Friday.

Ahead of the Asian opening, the EUR/USD pair is barely holding above the 38.2% retracement of its latest daily decline at around 1.1190 after briefly surpassing the 61.8% retracement of the same slide. In the 4 hours chart, a bullish 20 SMA converges with the mentioned 38.2% retracement, reinforcing the support. Technical indicators retreated sharply within positive levels, while the price was unable to clear the 100 and 200 SMA. The risk is now skewed to the downside, as only with firm gains beyond 1.1280 bulls would be able to build a case.

Support levels: 1.1190 1.1150 1.1110    

Resistance levels: 1.1240 1.1280 1.1320

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