EUR/USD drops to 50-day SMA for first since May as dollar rises

• EUR/USD trades at the lowest level since mid-August. 
• The pair tests 50-day SMA support for the first time in five months. 
• The dollar draws bids as the Fed expects faster economic recovery. 

EUR/USD is feeling the pull of gravity on Thursday, as the dollar gains altitude on Federal Reserve’s positive comments on the economy. 

The pair currently trades at the 50-day simple moving average support at 1.1742. The average has come into the play since May 25. Also, EUR/USD’s current level was last seen on Aug. 12. 

Fed upgrades language on economy

On Wednesday, the central bank said that it expects the US economic recovery from the coronavirus crisis to gather pace and foresees unemployment falling faster than the central bank expected in June. The bank kept rates pinned near zero and reiterated tolerance for high inflation, as expected. 

The decision to upgrade the economic outlook put a floor under the greenback. EUR/USD faced rejection at 1.1883 after the Fed and has been falling ever since. 

The European FX desks could join the dollar selling bandwagon, yielding a more profound decline in EUR/USD. However, the pair may defend the 50-day SMA support if the European Central Bank member De Guindos downplays the need for additional stimulus during his speech at 08:00 GMT. Markets will likely ignore the final Eurozone consumer price index for August, due at 09:00 GMT unless the data carries a significant upward or downward revision to preliminary forecasts. 

The focus would shift to the US Initial Jobless Claims and the US housing data during the early North American trading hours. 

Technical levels