EUR/USD: A test of 1.1800 likely on less hawkish Fed, eyes on US durable goods

The EUR/USD pair extended its post-FOMC overnight rally and went on to hit fresh two and a half years high at 1.1747 in the Asian trades this Thursday, as a less hawkish Fed statement continued to weigh on the sentiment around the US dollar.

EUR/USD: 1.1800 on cards?

Having posted 30-month tops in the Asia opening trades, the spot drifted slightly lower to test the major resistance-turned support of Aug 2015 highs placed at 1.1713. But, EUR/USD found fresh buyers just ahead of the last, taking the rate back towards multi-month peaks reached near the mid-point of 1.17 handle.

The greenback remains broadly offered, now posting fresh thirteen-month low near 93.20 region, the lowest levels since June 2016. The FOMC decision overnight came in line with market expectations, with the Committee keeping rates on-hold and pointing towards September as the launch time for the Fed’s balance sheet reduction plan.

However, a lack of fresh hints on whether the Fed remains on track to hike rates this year combined with a dovish language in the statement knocked-off Treasury yields across the curve, which triggered a broad based US dollar sell-off.

With the Fed outcome now behind, narrowing monetary policy divergence between the Fed and ECB will continue to keep the upbeat momentum intact in EUR/USD, as attention turns towards the US durable goods data due later tonight and Friday’s advance GDP numbers.

EUR/USD Technical Set-up  

According to Valeria Bednarik, Chief Analyst at FXStreet“...the rally could extend up to the 1.1800 price zone, where the pair has its 200 SMA in the weekly chart, and the top of the daily ascendant channel coming from mid-April with little in the way. A reversal in the ongoing bullish trend has become more unlikely, but intraday downward corrective movements can't be disregarded. Still, the pair will remain bullish even in the case of a decline down to 1.1580.”