- EUR/USD extends the rally on persistent USD weakness.
- The latest FOMC event keep weighing on the dollar.
- Markets’ focus will be on EMU’s CPI, US PCE.
The bid bias around the European currency stays everything but abated so far on Friday, always helped by the perseverant downside in the US dollar and broad month-end flows.
In fact, the offered stance in the buck accelerated following Wednesday’s FOMC meeting, forcing the US Dollar Index (DXY) to recede to multi-week lows amidst muted activity in US yields.
Conditions do appear to be supportive of further upside in EUR/USD in the near term, with a potential test of the psychological 1.2000 mark now emerging on the horizon. However, the mega-dovish stance from the ECB is expected to be there to undermine any serious bull run in spot or even the resumption of the uptrend seen in the April-June period.
Later in the docket, preliminary inflation figures in the broader Euroland are due, while inflation tracked by the PCE will also grab interest in the US calendar.
Short-term Price Outlook
EUR/USD bounced off sharply from monthly lows in the mid-1.1700s and extends the upside to the boundaries of the round level at 1.1900. The continuation of the recovery could see the 1.1980 region retested in the not-so-distant future. In this area converges weekly highs, the 50- and 100-day SMAs and a Fibo retracement. Further north comes in the psychological 1.2000 mark, where also sits the critical 200-day SMA. A surpass of the latter should alleviate the selling pressure.
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