The euro has been on the back-foot against a firmer dollar, also losing part of its shine following a rather uneventful monetary policiy statement by the Fed, very much in-line with expectations.
The Fed maintained its previous language, stating that rates are likely to be kept at record lows until mid-2015, resulting on a softer tone in the U.S. dollar heading into the NY close. Downbeat data out of the euro area -- including poor PMI and IFO -- had previously squeezed EUR/USD longs toward 1.2920 in Europe before the rate stabilized back above 1.2950.
The mild downside push barely changes the technical landscape, with the pair still populating around the usual suspect levels. While trading on Tuesday saw bulls in check by 1.3000/10 offers, the slide through European hours also managed to hold a trendline coming off July lows. Current market conditions remain largely driven by stop loss hunting.
FXWW Founder Sean Lee describes the recent EUR/USD stops-driven moves, taking as an example Tuesday's fall off 1.3060 high, noting: "The price was sitting around 1.3060 for much of Monday, but interbank dealers, many of whom chat with each other, all had pretty similar order books with heavy stops below 1.3000. The dealers know there are plentiful stops below that level."
Some bank bets appear to have turned with a neutral to bearish bias. Rabobank Strategists now expect risks of pullbacks towards 1.2836, while Commerzbank Analyst Karen Jones shares similar bearish views, noting focus should be now on key support at 1.2877/36 (200 day MA).
A price below 1.29 is where FX Times Technical Strategist Fan Yang suspects traders might be headed, saying that "focus remains on the rising trendline from July, which it is likely to meet around 1.2850, so there is still further room to the downside before we have to consider major support."
On the upside, the line of supply at 1.3000/10 represents the major upside hurdle to regain before the next 1.3060 target -- the October 5 high -- can come into view. Break above the latter may expose 1.3135/40 -- the October 17 high -- ahead of 1.3172 -- the September 17 high. For the remainder of the week -- even if an upbeat tone is seen -- it is hard to imagine the range will break on a lack of catalysts.