EUR/USD drops below 1.1900 as USD continues to gather strength ahead of FOMC

• EUR/USD extends its correction in American session on Wednesday.
• US Dollar Index climbs above 92.70 ahead of FOMC Minutes.
• Modest rebound witnessed in US T-bond yields supports USD’s recovery.

The EUR/USD pair made a sharp U-turn after spending the majority of the day in a tight range above 1.1900 and dropped to a daily low of 1.1868. As of writing, the pair was down 0.47% on a daily basis at 1.1873.

Focus shifts to FOMC Minutes

The greenback’s decisive recovery in the American session seems to have caused the bearish momentum to pick up steam on Wednesday. The US Dollar Index (DXY), which tracks the USD’s performance against a basket of six major currencies, erased Tuesday’s losses and was last gaining 0.48% on the day at 92.75. 

A modest rebound witnessed in the US Treasury bond yields seems to be supporting the DXY daily rally. At the moment, the 10-year US T-bond yield, which lost more than 4% earlier in the day, is down only 0.7%.

Later in the session, the FOMC will release the minutes of its July meeting. Previewing this event, “yield curve control, or as we call it, Y2C, was not mentioned in the FOMC statement or by Chairman Powell in his prepared statement or in the news conference,” noted FXStreet analyst Joseph Trevisani. “If there is any serious consideration it will show here. If the topic is more than academic it will be a sign that the governors are more worried than they have let on and will not bode well for the dollar.”

Technical levels to watch for