- The post-FOMC USD selloff allowed EUR/USD to rally around 80 pips from daily lows.
- The follow-through momentum pushed the pair to over two-week tops on Thursday.
- Traders look forward to Prelim German CPI and Advance US GDP for a fresh impetus.
The EUR/USD pair had a rather volatile trading action on Wednesday and the good two-way price move was exclusively sponsored by the US dollar price dynamics. Heading into the key FOMC event, the USD was back in demand amid a goodish pickup in the US Treasury bond yields. Apart from this, worries about the economic fallout from the fast-spreading Delta variant of the coronavirus further acted as a tailwind for the safe-haven greenback. The pair dropped to intraday lows, around the 1.1775-70 region after the Fed announced its monetary policy decision and sounded optimistic about the economy. The US central bank acknowledged the economy has made progress towards the maximum employment and price stability goals.
However, the Fed Chair Jerome Powell took a dovish turn at the post-meeting press conference and emphasised that they were some ways away from substantial progress on jobs. Powell was also cautious about tapering and said that policymakers discussed some details but it will take a few more meetings to get into it. The difference in tone between the statement and press conference prompted some aggressive selling around the USD, which was further pressured by a sharp decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond dropped back closer to five-month lows. This, in turn, prompted some short-covering move around the pair and led to a strong intraday rally of around 80 pips.
The pair built on the overnight gains and edged higher through the Asian session on Thursday, marking the fourth consecutive day of a positive move. The post-FOMC USD remained unabated and was seen as a key factor driving the pair higher. Market participants now look forward to the release of the Prelim German CPI report for July, which, along with the Eurozone Unemployment Rate and Consumer Confidence data might influence the shared currency. The key focus, however, will be on the release of the Advance Q2 US GDP print, due later during the early North American session. This, along with the US bond yields, will drive the greenback and might produce some meaningful trading opportunities around the major.
Short-term technical outlook
From a technical perspective, the pair stalled its recent leg down near a short-term ascending trend-line extending from September 2020 swing lows. The mentioned support is pegged near the 1.1770-60 region, which should now act as a key pivotal point for short-term traders. A sustained break below should pave the way for a fall towards YTD lows, around the 1.1700 mark touched in March. Some follow-through selling has the potential to drag the pair further towards the next relevant support near the 1.1610-1.1600 horizontal zone.
On the flip side, any subsequent positive move is likely to confront some resistance near the 1.1880 area. This is closely followed by the 1.1900 mark, above which a fresh bout of a short-covering move should allow the pair to aim back to reclaim the key 1.2000 psychological mark. The latter coincides with the very important 200-day SMA, which if cleared decisively will shift the near-term bias firmly in favour of bullish traders.
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