EUR/USD inter-markets: fade the rally?

The single currency met increasing and unexpected buying pressure at the end of the week following swelling weakness around the greenback. A dovish FOMC meeting plus Q2 GDP figures below estimates were far too much for USD, which extended its weekly drop to multi-day lows in sub-96.00 levels when tracked by the USD Index.

US yields have plummeted as well, accompanying the downbeat tone in USD and prompting Fed Fund futures to revert the recent upside. According to CME Group’s FedWatch tool, the probability of a rate hike by the Fed at its meeting in December has now deflated to nearly 37%.

Against the surge in EUR, volatility tracked by VIX dropped to fresh lows, although this is largely in response to the heightened demand for the safe haven JPY after the Bank of Japan greatly disappointed JPY-bears earlier in the day.

Higher-than-expected flash CPI figures in the euro area have passed largely unnoticed today, leaving the pair’s price action to the mercy of USD-dynamics, as this has been the case in recent weeks and it is expected to remain the same into upcoming sessions.

Next relevant resistance area for EUR/USD is at 1.1160/80, where are located recent highs, followed by the 1.1260 region, 50% retracement of the May-June drop and the base of the 7-month rising channel.