EUR/USD reverses early losses as Yuan rallies, focus on Fed forecasts


  • EUR/USD has risen back to levels near 1.1850. 
  • The yuan sell-off likely put a bid under EUR/USD. 
  • Federal Reserve is expected to reiterate the dovish stance. 
  • Dollar buying could emerge if the central bank raises growth forecasts.

EUR/USD has recovered early Asian session lows, possibly tracking a continued rally in China's yuan. However, big gains may remain elusive in Europe on caution ahead of Federal Reserve's (Fed) rate decision. 

The pair is currently trading mostly unchanged on the day at 1.1848,  having hit a low of 1.1829 early Wednesday. At one point, the single currency looked set for a deeper decline to 1.18. 

However, the selling pressure weakened, allowing recovery after the People's Bank of China's decision to raise the daily yuan fix by most in five months triggered broad-based US dollar selling. 

China's central bank set the yuan reference rate at 6.78725 per US dollar – the highest level since May 9, 2019, and up 397 pips from Tuesday's fix of 6.8222. The yuan rose to a fresh 16-month high of 6.7682, extending the 4% quarter-to-date gain. 

Additional bullish pressure for the EUR may have stemmed from reports that UK's Prime Minister Boris Johnson is prepared to compromise with Tory party rebels over the Brexit bill. 

All eyes on the Fed

The US central bank is expected to keep interest rates unchanged at record lows and reiterate tolerance for high inflation. The markets have already factored the odds of rates remaining low for a prolonged period. The Fed funds futures show implied rates pinned down near zero well into 2023, according to Reuters. 

As such, the focus would be on the Fed's growth and inflation forecasts. If the Fed raises the growth outlook, the greenback would pick up a bid, sending EUR/USD, as noted by BK Asset Management's Kathy Lien. 

Ahead of the Fed decision, the pair may take cues from the Eurozone Trade Balance and the US Retail Sales data. 

Technical levels

EUR/USD

Overview
Today last price 1.1848
Today Daily Change 0.0001
Today Daily Change % 0.01
Today daily open 1.1847
 
Trends
Daily SMA20 1.1842
Daily SMA50 1.1724
Daily SMA100 1.1411
Daily SMA200 1.1212
 
Levels
Previous Daily High 1.1901
Previous Daily Low 1.184
Previous Weekly High 1.1918
Previous Weekly Low 1.1753
Previous Monthly High 1.1966
Previous Monthly Low 1.1696
Daily Fibonacci 38.2% 1.1863
Daily Fibonacci 61.8% 1.1877
Daily Pivot Point S1 1.1824
Daily Pivot Point S2 1.1801
Daily Pivot Point S3 1.1763
Daily Pivot Point R1 1.1885
Daily Pivot Point R2 1.1924
Daily Pivot Point R3 1.1946

 

 

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