EUR/USD keeps falling wedge breakout past 1.1800 with eyes on Fed verdict
- EUR/USD picks up bids to refresh intraday top, prints three-day uptrend.
- DXY shrugs off firmer Treasury yields as mixed US data backs Fed’s rejection to tapering.
- FOMC is up for repeating the status-quo, Powell’s words, policy statement will be the key.
- Bears could take vengeance on hearing the word ‘tapering’, bulls need validations.
EUR/USD remains mildly bid, up for the third consecutive day around 1.1825, heading into Wednesday’s European session. The major currency pair confirmed a bullish chart pattern earlier in the week and the upside momentum extends as markets prepare for the US Federal Open Market Committee (FOMC).
Behind the moves could be the mixed data signals from the US, as well as the recently picking up coronavirus variant fears. Also, ECB policymakers' readiness, latest by de Cos, to stay sidelined before confirming the monetary policy reset contrasts the Fed’s latest hawkish tilt, allowing markets to brace for windfall profits.
On Tuesday, US Durable Goods Orders and housing numbers came in softer-than-expected for June and May respectively, the notable upward revision to the priors renewed bets that the Fed hawks have scope. Also on the same line could be the strong readings of US CB Consumer Confidence figures that jumped to the pre-pandemic levels, to 129.10 for July.
The US Centers for Disease Control and Prevention (CDC) edits mask mandate and Australia’s key coronavirus infected state, New South Wales (NSW) refreshes the 16-month high of the daily cases to probe the EURUSD bulls. Further, the UK reports the highest death toll since March 17 and offers another reason to be worried. Additionally, China’s crackdown on technology and tuition stocks, as well as the Sino-American tussles, also weighs on the market’s mood and put try to defend the US dollar bulls, but cannot ahead of the Fed.
Against this backdrop, Wall Street benchmarks snapped a five-day uptrend and the US 10-year Treasury yields also slipped 3.7 basis points (bps) to 1.23% by the press time. The indecision extends in Asia as stock futures pare early day gains.
Looking forward, German GfK Consumer Confidence for August, expected +1 versus -0.3 prior, as well as the risk catalysts, can entertain the EUR/USD traders. However, major attention will be given to the Fed.
The latest economic projections from the US central bank hint at firmer inflation and growth rate pushing the Fed towards policy normalization. Even so, Chairman Jerome Powell stayed defensive and the latest Delta covid variant woes offer an extra reason for the policymaker to hold the cautious bias before tapering.
Fxstreet’s Joseph Trevisani said, “Mr. Powell is highly unlikely to reveal or even expound on any of Fed's considerations or plans on Wednesday afternoon. That will not, of course, stop the markets from running with a perception.”
Technical analysis
EUR/USD rises for the third consecutive day on Wednesday after confirming the falling wedge bullish formation on the daily chart. The MACD histogram also prints the strongest bullish signals since late April, backing the breakout. However, 21-DMA probes the pair’s immediate upside around 1.1820, a break of which will aim for the fresh monthly high near 1.1900. Meanwhile, pullback moves become less worrisome until staying beyond the previous resistance line near 1.1780, a break of which should refresh the monthly low under the present one 1.1751.
Read: Federal Reserve Preview: Three reasons why Powell could pause, pummeling the dollar