EUR/USD eases towards mid-1.16s on DXY recovery
The EUR/USD pair surged to a new 23-month peak at 1.1712 during the European session on a sharp USD sell-off but quickly changed its direction to erases the majority of its daily gains in the NA session. As of writing, the pair was trading at 1.1654, up only 10 pips on the day.
The pair's sharp fluctuations witnessed during the second half of the day seem to be the product of the DXY's high volatility. After slumping to 93.50, the US Dollar Index gathered a strong bullish momentum amid robust macro data and turned positive on the day. As of writing, the index is at 93.83, just a tad above yesterday's closing level. In addition to today's data, short coverings ahead of tomorrow's FOMC meeting might have landed an extra hand to the greenback. Although the FOMC is expected to keep its monetary policy unchanged, a hawkish tone in the statement and a precise timing for the balance sheet reduction could further help the USD find demand.
- US Consumer confidence unphased by political noise - ING
- Fed could point to an announcement on balance sheet policies in September - Barclays
On the other hand, the shared currency lost the interest of the participants after the ECB Governing Council member Ewald Nowotny argued that there was no need to set a timetable to end the QE. Nowotny further added, "it would be wise to ease slowly off the accelerator with regard to stimulus."
In the last hour, the pair has been confined in a tight trading range, and unless the USD reacts to the Senate's vote on the House healthcare bill later in the session, we could see the continuation of the consolidation. Other than the FOMC meeting, there won't be any data in tomorrow's economic calendar that could potentially impact the price action.
Technical outlook
1.1712/13 (Aug. 24, 2015, high/daily high) aligns as a critical resistance for the pair. 1.1790 (Jan. 15, 2015, high) and 1.1870 (Jan. 11, 2015, high) could come as next hurdles if the pair successfully overcomes that level. On the downside, supports could be encountered at 1.1620 (Jul. 21 low), 1.1500 (psychological level) and 1.1395 (Jul. 12 low).
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
