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  • The pair recovers from Wednesday’s negative session.
  • FOMC left rates on hold, said inflation drop is transitory.
  • Final manufacturing PMIs in Euroland next on tap.

After a brief re-test of the area below the 1.1200 handle on Wednesday, EUR/USD has managed to regain some composure and is now posting some decent gains near 1.1210.

EUR/USD now looks to data

The weekly up move in the pair has run out of steam in the 1.1265/70 band on Wednesday, briefly returning to lows near the 1.1190 region in the wake of the FOMC event.

In fact, the FOMC message was not as dovish as expected yesterday, prompting a knee-jerk in spot to sub-1.1200 levels after Chief Powell suggested rate cuts remain off the table for the time being and the slower pace in inflation was transitory. The upbeat assessment of the economic outlook and steady hopes that consumer prices would converge to the Fed’s target lent the buck much needed support, pushing the US Dollar Index (DXY) to as high as the 97.70 area.

Later in the session, final April manufacturing PMIs are due in Euroland ahead of the speech by ECB’s P.Praet. Across the ocean, the weekly report on the labour market is expected along with Challenger Job Cuts and Factory Orders.

What to look for around EUR

Recent data in Euroland and Germany allowed market participants to believe that some healing process could be under way in the region amidst the ongoing slowdown. However, this scenario needs confirmation in the next months, while the current ‘neutral/dovish’ stance from the ECB is expected to persist for the reminder of the year and probable H1 2020. The broad-based risk-appetite trends and USD-dynamics are posed to rule the sentiment surrounding the European currency for the time being, all in combination with the onoging US-China trade dispute and potential US tariffs on EU products. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections in late May, as the populist option in the form of the far-right and the far-left movements appears to keep swelling among voting countries.

EUR/USD levels to watch

At the moment, the pair is gaining 0.12% at 1.1206 and a break above 1.1264 (high May 1) would target 1.1275 (55-day SMA) en route to 1.1323 (high Apr.17). On the other hand, immediate support emerges at 1.1109 (2019 low Apr.26) seconded by 1.0839 (monthly low May 11 2017) and finally 1.0569 (monthly low Apr.10 2017).