The EUR/USD pair remains better bid heading into Europe, consolidating the recovery from weekly lows of 1.1166, as markets digest reports of Macron's sweeping parliamentary election Round 1 victory.
EUR/USD: ECB out, eyes on FOMC
The spot closed the bullish opening gap, although fails to extend the recovery beyond 1.1200 levels, in the wake of divergent monetary policy outlooks between the ECB and Fed.
Last week, he ECB announced no changes to its monetary policy program, while lowered its inflation forecasts, while the FOMC is set to announce a rate hike this week, which is driving the US yields higher across the curve. Treasury yields rally +0.60% to +1.15% so far this session.
However, the major manages to keep the bid tone intact, as the EUR bulls cheers the reports of new French President Macron having found a strong parliamentary majority. Moreover, risk-aversion continues to haunt markets, with Asian equities largely subdued, boosting the funding currency status of the Euro.
Looking ahead, we have a big week for the EUR/USD pair, with plenty of key risk events from the US, including the CPI, retail sales and industrial production data. Meanwhile, the FOMC decision is expected to be the main market mover, which will shape-up next direction in the buck.
EUR/USD Technical Levels
Franco Shao at Forex Cycle noted: “EURUSD’s fall from 1.1285 extended to as low as 1.1166. Deeper decline is still possible and next target would be at around 1.1130. However, as long as 1.1109 support holds, the fall would possibly be consolidation of the uptrend from 1.0569 (Apr 10 low), another rise towards 1.1450 could be expected after the consolidation. Resistance is at 1.1285, a break of this level could signal resumption of the uptrend.”
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