The shared currency finally managed to overtake the 1.3500 handle versus the dollar and extended gains toward its highest in 14 months on Wednesday, as investors assess a disappointing US GDP reading and ahead of the FOMC monetary decision.
"The FX market impact from the unexpected decline in U.S. Q4 GDP has so far been limited, with the negative U.S. dollar impact from continued Fed easing expectations offset to some extent by a more cautious market mood, which is U.S. dollar positive," says Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank.
Meanwhile, stocks trade broadly lower in Europe and on Wall Street, although contraction in U.S. economic growth failed to inspire big moves. In other data, ADP reported U.S. private payrolls increased by 192,000 in January, exceeding expectations.
Euro Eyes 1.3600 Ahead Of FOMC
The euro rallied to its highest level in 14 months versus the greenback at 1.3577 before losing some steam as investors await the next risk event of the day: the FOMC monetary policy decision. A break above 1.3600 would strengthen the bullish bias, and could send EUR/USD toward 1.3660 in no time.
On the other hand, 1.3500 is immediate support for the cross en route to the 1.3400 level, which stands as a major support needed to keep the positive bias alive.
"In addition to the U.S. GDP report, the proximity of the Federal Reserve's monetary policy announcement may also be keeping some market participants on the sidelines. If, as expected, the Fed offers a firm signal of continued easing, today's slight jitters could dissipate," says Wells Fargo. "We suspect recent FX trends could continue in the near term, with further gains in the euro and commodity currencies possible, and mild bias towards yen weakness."
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