US Dollar extends losses to 94.20 on ECB headlines

Although it looked like the US Dollar Index, which tracks the greenback against six major currencies, was looking to extend its sideways action into the end of the NA session amid thin trading volume, a recent rally witnessed in the EUR/USD pair dragged the index to a session low near 94.20.

Citing sources familiar with the matter, Bloomberg reported that some members of the European Central Bank thought that the end of 2019 would be too late for a rate hike. Following this news, chances of a September 2019 ECB rate hike rose to 80% from 69%. The EUR/USD pair quickly jumped to 1.1670 from 1.1640 and weighed on the greenback. However, the bullish move lacked a follow-through and allowed the index to steady near 94.20.

On Thursday, the FOMC is going to release the minutes of the June 13 meeting, at which the Fed announced a 25 basis points rate hike. 

"We expect the minutes to provide additional insight into the Committee’s deliberations on longer-term monetary policy questions as well as the potential downside economic risks arising from US trade protectionism," Nomura analysts wrote in a recently published report and elaborated further:

"Specifically, the Committee’s decision to remove forward guidance language from the post-meeting statement may have been accompanied by an interesting discussion during the meeting."

Ahead of the FOMC event, the ADP is going to publish its monthly private employment report, which is unlikely to receive a significant reaction from the market as a healthy labor market in the U.S. wouldn't be a surprise. Moreover, Friday's NFP report, specifically the wage inflation, will be a more relevant data regarding the Fed's monetary policy.

Technical levels to consider

 The index could face the initial resistance at 94.45 (daily high) ahead of 95 (psychological level) and 95.25 (Jun. 28 high). On the downside, supports are located at 93.85 (Jun. 25 low), 93.20 (Jun. 6 low) and 92.70 (May 9 low).