– The US dollar strengthened further, holds to gains after FOMC minutes.
– Euro’s short-lived recovery shows bears are in control.
– The EUR/USD pair confirms downtrend, posting lowest daily close since last March.
The EUR/USD dropped for the second day in a row, posting the lowest daily close in two months.A stronger US Dollar continues to drive the pair to the downside.Higher Treasury yields and risk aversion supported the Greenback.The recovery experienced during the European session was short-lived, and the pair dropped back toward 1.0750.
Economic data released on Wednesday showed the German IFO Business Climate Index edged lower to 91.7 in May from 93.4 in April (revised from 93.6).This reading came in weaker than the market expectation of 93.The Euro was unaffected by the report.On Thursday, Germany will release a new estimate of Q1 GDP that is expected to remain at 0%.
The FOMC minutes showed officials were divided on the future path regarding interest rates, with some members pointing out the need for more rate hikes and others arguing that “further policy tightening after this meeting may not be necessary”.The minutes showed “participants generally expressed uncertainty about how much more policy tightening may be appropriate.” The US Dollar weakened marginally after the minutes but held onto most of its daily gains.
Market sentiment deteriorated further amid a gloomy growth outlook and the debt-ceiling drama.
Negotiations continue in Washington but no deal yet.On Thursday, economic reports due in the US include Jobless Claims.
EUR/USD short-term technical outlook
The daily chart shows EUR/USD closed below 1.0770, suggesting further weakness.Although some consolidation is possible, the prevailing direction is likely to be downwards.The 100-day Simple Moving Average (SMA) is flattening, about to turn to the downside, currently hovering around 1.0805, reflecting three weeks of declines.
On the 4-hour chart, the pair remains in a downward channel.Despite the Relative Strength Index (RSI) nearing oversold levels, as long as it stays below 1.0770, more losses are expected.The next target below 1.0750 could be around 1.0720, followed by 1.0700.In the event of a sharp decline, support may be found at 1.0670.However, on the upside, if there is a recovery above 1.0800, it would alleviate the downward pressure, favoring a period of consolidation and a potential test of the 1.0825/30 area.
View Live Chart for the EUR/USD
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