After dropping to its lowest level since July 27 at 1.1660 in the European session amid some dovish remarks in the ECB meeting minutes, the EUR/USD pair took advantage of the weakening greenback in the second half of the day and recovered above the 1.17 handle. As of writing, the pair was trading at 1.1750, still losing 0.15% on the day.
The minutes of the July 19-20 ECB meeting showed that the rate setters voiced their concerns about possible market overshooting, notably in FX. Commenting on that statement, "there are sufficient conditions in the ECB's statement that is still a relatively low level of concern. The overshooting was not realized it was "possible." It is not happening now but could "in the future," Marc Chandler, Global Head of Currency Strategy at BBH, said.
On the other hand, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, failed to rise above the 94 handle and eased towards the mid-93s as market rumors of Gary Cohn, the director of the White House's National Economic Council, stepping down from his position weakened the USD. Although White House denied the news, the index failed to retrace its losses.
News of a terrorist attack in Barcelona triggered a flight-to-safety in the second half of the NA session, ramping up the demand for safe-havens such as the U.S. Treasury bonds, pushing their yields down and weighing on the buck. At the moment, the 10-year T-bond yield is at 2.2%, losing 1.25% on the day.
Technical outlook
Tomorrow's economic calendar won't be offering any data that has a potential to impact the price action of the pair and we could see the continuation of the sideways movement. Moreover, the RSI on the daily graph is also supporting the view of a near-term neutral outlook as it stays around the 50 mark. The pair could face the initial resistance at 1.1780 (20-DMA) ahead of 1.1845 (Aug. 11 high) and 1.1905 (Aug. 2 high). On the downside, supports align at 1.1660 (daily low), 1.1610 (Jul. 26 low) and 1.1500 (psychological level).
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