EUR/USD off-highs, drops back to test 1.1650 ahead of PMIs

• USD on a steady recovery path.
• Failed at higher levels once again.
• US tax reform bill, Fed Chair announcement – key.

The EUR/USD pair is seen reversing from five-day highs of 1.1671 and now reverts to the familiar region near mid-1.16s, as the bulls await Eurozone final manufacturing PMI reports for fresh impetus.

EUR/USD: 1.1660/70 barrier still capping the upside

The recovery in risk sentiment stalled the selling seen in Treasury yields and US dollar across the board, sending EUR/USD away from the best levels seen since the ECB dovish taper announcement.  

The greenback is seen on a steady recovery mode after the Asian sell-off, triggered by a sharp drop in the US futures on reports of a temporary corporate tax cut proposed in the tax reform bill due to be unveiled later today.

The USD bulls were left unimpressed by a non-event Fed outcome, while anxious markets ahead of the next Fed Chair announcement due in the American afternoon. Meanwhile, in absence of first-tier macro news from the EU docket, markets await the BOE decision for any cross-driven impact on the Euro.

Also, of note remains the US jobless claims data and speeches by the FOMC members Powell and Dudley lined up in the day ahead.

EUR/USD Technical Levels

Jim Langlands at FX Charts, “As before, ideally the Euro should hold below1.1670, this being the 100 DMA and the neckline of the head/shoulder formation, but a topside break would trigger stops and could see a run back to 1.1700+. The 4 hour charts still suggest that this is a possibility so I would be cautious but overall as long as we don’t see a daily close above 1.1700, I prefer to trade from the short side. Back below 1.1600 will find strong support at 1.1575 and then again at 1.1510.”