EUR/USD recovers further to the 1.2130 area
- US dollar corrects lower against the euro on Monday.
- EUR/USD back above 1.2100 but still shows risks tilted to the downside ahead of the Fed.
The EUR/USD reached a fresh daily high during the American session at 1.2130. The euro is among the top performers on Monday and is holding onto daily gains versus the US dollar, recovering from weekly lows under 1.2100.
The US Dollar lost strength amid mixed equity prices in Wall Street and despite higher US yields. The Dow Jones drops by 0.65%, and the Nasdaq gains 0.44%. The 10-year yield stands at daily highs at 1.495%.
Investors await the Federal Reserve’s monetary policy decision, due on Wednesday. The two-day meeting starts on Tuesday. No change is expected in monetary policy and market participants will look for clues about the asset purchase program. Before the Fed, on Tuesday, retail sales and the PPI index will be important reports.
“Although we expect a significant upward revision to the Fed’s current 2.4% forecast for PCE inflation in 2021 – perhaps a rise of more than a percentage point – we expect the FOMC statement to continue to describe the current inflation overshoot as transitory, and Chair Powell is likely to mount a vigorous defense of this thinking in the press conference”, says Bill Diviney, Senior Economist at ABN Amro.
Back above 1.2100
The EUR/USD pair is back above the 1.2100, but the daily and four-hour charts are still biased to the downside. A recovery above 1.2200 would send the pair above the 20-day moving average and also above a downtrend line from May’s top, changing the bias in favor of the euro.
On the flip side, a decline back under 1.2100 would add bearish pressure. The next support is seen at 1.2055/60.
Technical levels