• DXY recovery gains traction.
  • 1.2000 support in sight.
  • The US ISM PMI and FOMC minutes hold the key.

The bid tone around the US dollar keeps growing bigger in mid-Europe, now pushing the EUR/USD pair closer towards the 1.20 handle.

EUR/USD erodes nearly 60 pips from 4-month tops

The latest leg lower in the spot can be mainly attributed to the ongoing broad-based US dollar recovery, with the bulls recovering ground further, as we move closer towards the releases of the US ISM manufacturing PMI and Dec FOMC meeting minutes. The latest Fed minutes are is likely to throw fresh light on the Fed’s rate hike path this year.

The EUR/USD pair ignored upbeat German labor market report, which showed that the country’s unemployment rate dropped to a record low while the unemployment change for Dec came in at -29k vs. -13k expected and -20k previous.

According to Haresh Menghani, Analyst at FXStreet, “Later in the day, the December FOMC meeting minutes would influence investors' expectations over the central bank's monetary policy outlook and provide some meaningful momentum ahead of Friday's keenly watched NFP report.”

EUR/USD Technical Levels

Slobodan Drvenica, Information & Analysis Manager at Windsor Brokers Ltd, wrote: “Strong uptrend remains intact and underpinned by weak dollar, showing scope for eventual attack at 1.2092 (2017 high, posted on 08 Sep) break of which to extend current wave C of five-wave sequence from 1.1737 towards its 200% Fibonacci expansion at 1.2150 and 1.2166 (Fibo 50% of larger 1.3992/1.0340 descend). Meanwhile, the pair may extend pullback on overbought daily studies towards initial support at 1.2000 (psychological support/Tuesday's low, with deeper dips seen towards 1.1950 (daily Tenkan-sen) and 1.1922 (rising 10SMA). Buying dips remain favored scenario while 10SMA holds.”

 

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