EUR/USD backs away from 14-month highs, rally over?
After reaching its highest level since early May of 2016 at 1.1583 during the first half of the NA session, the EUR/USD gave back some of its daily earnings with a technical correction in the US afternoon to trade at 1.1555 at the moment, where it's still gaining 0.7% on the day.
Nothing seems to be going in greenback's way lately. The US Dollar Index, which has been staying under a constant selling pressure on disappointing macro data and dovish signals from the Fed, took another blow on Tuesday after Republicans, once again, failed to reach the majority to pass the healthcare bill that would repeal and replace Obamacare. Although the healthcare bill doesn't have a direct tie to the demand for the greenback, investors are concerned that Trump administration won't be able to enact the tax reform and higher infrastructure spending, which helped Donald Trump win the presidential election in the first place.
- US Dollar makes a modest recovery, still headed for lowest close in 11 months
- Where now for US policy and markets following healthcare failure? - ING
Tomorrow's macro economic calendar won't be offering any significant data that have the potential to impact the price action, which could create an opportunity for participants to take some profits off the table ahead of Thursday's ECB meeting and allow the EUR/USD pair to make a deeper correction.
Technical outlook
1.1616 (2016 high) is a critical resistance for the pair and a break above this level could trigger another buying wave towards 1.1713 (Aug. 24, 2015, high) and 1.1800 (psychological level). On the downside, supports could be seen at 1.1500 (psychological level/former resistance), 1.1410 (20-DMA) and 1.1315 (Jul. 5 low).
- EUR/USD: Gains expected to falter – Westpac