EUR/USD upside lost momentum near 1.1780

The increasing weakness around the greenback pushed EUR/USD above the critical 1.1700 handle on Wednesday, although the up move seems to have lost some momentum in the vicinity of 1.1780.

EUR/USD bid post FOMC

The pair recorded an ‘outside day’ on Wednesday, quickly breaking above the critical barrier at 1.1713 (2015 tops) after markets perceived yesterday’s FOMC minutes as dovish. After testing the vicinity of 1.1780 in early trade, spot receded to the current 1.1740 area, where also sits the 50% Fibo retracement of the 2014-2017 decline.

In line with market consensus, the Federal Reserve left unchanged its Fed Funds target range at 1.00%-1.25%, although the statement sounded downbeat as the Committee now sees inflation running ‘below 2%’ instead of the previous ‘somewhat below 2%’.

The Fed’s tone poured (more) cold water over expectations of further tightening in the next months, with the probability of a third rate hike in December now at just below 47%.

EUR/USD levels to watch

At the moment, the pair is up 0.01% at 1.1736 facing the next up barrier at 1.1777 (2017 high Jul.27) seconded by 1.1800 (psychological level) and then 1.1900 (psychological level). On the flip side, a breach of 1.1608 (10-day sma) would target 1.1501 (21-day sma) and finally 1.1477 (low Jul.20).

Furthermore, the daily RSI (14) shows the pair is in overbought territory, while the MACD stays well into the bullish camp.