EUR/USD struggles for direction near 1.1880

He single currency is extending yesterday’s pullback following the FOMC meeting, now dragging EUR/USD to the 1.1880/70 band ahead of the opening bell in the Old Continent.

EUR/USD weaker post-FOMC

The pair remains under pressure following Wednesday’s bearish ‘outside day’ amidst renewed buying interest around the greenback in response to a hawkish Fed.

In fact, the Federal Reserve caught markets off-guard yesterday, keeping the ‘dots plot’ unchanged from the June meeting: the Committee still sees another hike this year and three hikes in 2018. In the longer run, strategists at TD Securities noted “There was a larger downward revision to the longer-run dots, which revealed somewhat less conviction in how much the equilibrium real interest rate will rise over time”.

In addition, the Committee will start its portfolio drawdown in October with $6 billion in Treasuries and $4 billion in MBS each month.

Regarding inflation, the Fed still sees the recent weakness as temporary, expecting consumer prices to converge over the 2% target in the medium term, while sustaining at the same time the validity of the Phillips curve.

In the data space today, the European Commission will publish its advanced consumer confidence gauge in the region, while President M.Draghi will speak at the 2^nd ESRB annual conference in Frankfurt.

Across the pond, the usual report on the labour market is due seconded by the more relevant Philly Fed manufacturing index for the current month.

EUR/USD levels to watch

At the moment, the pair is losing 0.09% at 1.1883 and a breakdown of 1.1862 (low Sep.20) would target 1.1837 (low Sep.14) en route to 1.1773 (55-day sma). On the upside, the initial hurdle emerges at 1.1928 (21-day sma) followed by 1.1941 (10-day sma) and finally 1.2024 (high Sep.20).