Later today, US new home sales are due seconded by the Richmond Fed index
Upbeat risk sentiment across the financial markets keeps the dollar on the back foot on Tuesday. However, the downside momentum has slowed while the USD index has settled within a narrow range around the 93.00 figure, struggling for direction following a sell-off seen on Monday as flash PMI prints came in below estimates.
Wall Street stocks jumped on Monday as investors cheered the news that FDA granted full approval for the two-dose Pfizer-BioNTech vaccine for Covid-19. Asian markets extended gains on Tuesday while European equities opened in the positive territory after the data showed that German GDP grew by 1.6% in the second quarter, up from the 1.5% preliminary estimate. Later today, US new home sales are due seconded by the Richmond Fed index.
As the Jackson Hole meeting looms, dollar bulls could regain control in the coming days due to a more cautious tone among investors, as market participants expect the Federal Reserve to express a hawkish tone on the outlook for monetary policy tightening later this year amid rising inflation and the persistent economic recovery.
As such, EURUSD peaked at 1.1750 yesterday to turn marginally lower on Tuesday. Of note, the common currency came under some selling pressure despite solid economic data out of Germany, suggesting the pair is driven by the dollar’s overall dynamics. EURUSD was last seen changing hands around 1.1730, down 0.12% for the day.
If the 1.1750 intermediate resistance continues to cap gains in the European currency, the prices may get back under the 1.1700 figure eventually. In a wider picture, the technical outlook has been deteriorating gradually as the pair is nearing the 1.1570 area where the 100- and 200-week SMAs converge. On the upside, the 20-DMA (today at 1.1775) represents the key barrier on the way towards 1.1800.