• EUR/USD spikes to 1.0198 and quickly pulls back to 1.0160.
  • US dollar and euro among top performers on Wednesday.
  • Market participants await FOMC minutes.

The EUR/USD continues to move sideways on Wednesday around 1.0160/70 ahead of the release of the FOMC minutes. The pair made a run to 1.0198, hitting the highest level in two days but it quickly pulled back toward 1.0160.Economic data released in the US showed retail sales stagnated in July, against expectations of a 0.1% increase. The details of the report were above market consensus. Later on Wednesday, the Federal Reserve will release the minutes of its latest meeting when it raised the Fed Funds rate by 75 basis points. Market participants will look for clues about the next steps of the central bank.

Analysts at Brown Brothers Harriman expect the minutes to come in very hawkish. “It wasn’t until Chair Powell’s post-decision press conference that markets saw what they believed was a dovish pivot, when he acknowledged the pace of future rate hikes will depend on incoming data (…) Because the Fed has embarked on a corrective communication effort since that meeting, the minutes should reveal more about the Fed’s hawkish thinking then”. Such a scenario could be bullish for the US dollar.

The DXY is up by 0.22% on Wednesday, supported by higher yields and risk aversion. The euro is also gaining ground. EUR/CHF is up sharply for the second day in a row, recovering almost a hundred pips from record lows, approaching 0.9700. EUR/GBP is at two-day highs near 0.8450 despite higher-than-expected UK inflation data.

Short-term outlook

The EUR/USD continues to move sideways under the 20-day Simple Moving Average, today at 1.0210 and also still looking at the 1.0100/10 critical support. A break under 1.0100 should clear the way to more weakness. On the flip side above 1.0210, the euro could strengthen. Still a consolidation above 10.270 is needed for a test of the 55-day SMA that capped the rally last week, currently at 1.0335.

Technical levels

This article was originally published by Fxstreet.com.Read the original article here.

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