EUR/USD resumed the upside on Wednesday following Tuesday’s “inside day” candle, noting a priori that a deeper pullback seems to lack conviction among market participants.
In the meantime, USD-bears have regained control and dragged the dollar to the area of 2020 lows near 93.40 when tracked by the US Dollar Index (DXY). Further out, the ongoing economic recovery in the euro bloc, hopes of a COVID-19 vaccine and massive monetary stimulus keep sustaining the upbeat momentum in the euro and the rest of the risk complex.
Nothing worth mentioning data wise in Euroland on Wednesday, whereas flash trade balance results in the US showed the trade deficit is predicted to shrink to $70.6 billion in June.
All the attention, however, will be on the FOMC event and the subsequent press conference by Chief Powell, with the pandemic, the Fed’s forward guidance, yield curve control (YCC) and the prospects of the US economy all in the centre of the debate.
EUR/USD advanced to levels last seen in June 2018 near 1.1780 on Monday, confirming once again the solid momentum around both the single currency and the rest of its risky peers. The sharp move up, while largely triggered by dollar-selling, has found extra sustain in auspicious results from the domestic docket, in turn supporting further the view of a strong economic recovery following the coronavirus fallout. Also lending wings to the momentum around the euro, the recently clinched deal on the European Recovery Fund helped putting political fears within the region to rest (for now), while the solid position of the current account in the region adds to the rally.
At the moment, the pair is gaining 0.37% at 1.1758 and a breakout of 1.1781 (2020 high Jul.27) would target 1.1815 (monthly high Sep.24 2018) en route to 1.1852 (monthly high Jun.14 2018). On the other hand, immediate contention is located at 1.1495 (monthly high Mar.9) seconded by 1.1448 (50% Fibo of the 2017-2018 rally) and finally 1.1422 (monthly high Jun.10).