EUR/USD is breaking the downtrend and eyes turn back to July lows ahead of FOMC

• EUR/USD has been slipping lower and below the 100-hr SMA and the 1st August overnight low of 1.1672.
• The dollar is now bid leading into the FOMC meeting today and there is an air of celebration around the state of the US jobs market ahead of the nonfarm payrolls on Friday.
• EUR/USD is currently trading at 1.1669 vs a high of 1.1699 and a low of 1.1664.

While the data has not been particularly pretty outside of the ADP report, in the background of the US July ISM manufacturing index that missed expectations on the headline, coming in at  58.1 vs 59.4 expected, the employment aspect of the report did beat expectations, arriving at 56.5 vs 56.0 prior. In respect of the ADP report, it was the best reading since March and a solid prelude for nonfarm payrolls on Friday where nearly every industry posted strong gains and small business hiring picked up.  

Meanwhile, data from the eurozone today came with German retail sales increasing by a strong 1.0% m/m in June after falling -1.6% in the previous month. This follows yesterday’s release of eurozone inflation that rose 2.1% y/y in July while GDP increased by 0.3% Q/Q in the second quarter, missing the market estimate and sending the euro lower.  

FOMC preview:

• FOMC Preview: don’t get over excited, probably there won’t be much to see here

Analysts at Rabobank explained that it is often the case that market participants are biting their nails ahead of a Fed meeting – Today’s offering from the FOMC, however, is not expected to offer much in the way of new news:

“The markets is almost fully priced for a September rate hike and today’s announcement is merely expected to re-affirm the Fed’s hawkish guidance.  That said, there is the potential for the Fed to offer some clues for its policy leaning later in the year.  The Fed may be tilted towards hiking for a fourth time this year in December but, despite the strength of US GDP growth in Q2, this is far from a done deal,” explained analysts at Rabobank. “

• FOMC Preview: 9 major banks expectation from August meeting

EUR/USD levels

The market turned bid when holding above the 1.1575 the July low and rallying into 1.1740’s in month-end flows yesterday, but there has been a strong level of supply there, forcing the pair right back below the hourly MAs and to break the  200 4hr-SMA today – which is significant – as is the test of the 50-D SMA at 1.1675. Indeed, the single currency has started to erode the short-term downtrend and a break lower will put attention back to 1.1510 and then the 200-W SMA at 1.1373. Only a break of the recent highs through 1.1750 will put 1.1855 and then the 55-W SMA up at 1.1939 back on the map.