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  • EUR/USD looks to close third straight day higher.
  • EU’s Dombrovskis says ESM strongly supports Franco-German recovery fund proposal.
  • US Dollar Index steadies around 99.50 after FOMC Chairman Powell’s testimony.

After gaining nearly 100 pips on Monday, the EUR/USD pair touched its highest level in two weeks at 1.0976 on Tuesday. With the trading action turning subdued in the American session, the pair has gone into a consolidation phase and was last seen up 0.15% on the day at 1.0928.

The upbeat market mood at the start of the week and the Franco-German recovery fund proposal provided a boost to the shared currency. Earlier in the day, European Commission Vice President Valdis Dombrovskis said the European Stability Mechanism (ESM) is strongly supporting the proposal. The Commission is looking to present the proposal at the European summit scheduled for May 27th.

USD weakness persists

On the other hand, the greenback is having a difficult time finding demand in the absence of significant macroeconomic drivers. The only data from the US revealed that Housing Starts in April declined at a record pace of 30.2% in April but was largely ignored by the market participants.

In the meantime, FOMC Chairman Jerome Powell refrained from delivering any surprising remarks about the economic or the policy outlook during his testimony before the Senate Banking Committee. Powell reiterated that the Fed remains committed to using all the tools available to continue to support the economy. At the moment, the US Dollar Index is posting small daily losses near 99.50.

On Wednesday, the European economic docket will feature the Consumer Price Index data for April. Later in the day, the FOMC will publish the minutes of its April 28-29 meeting.

Technical levels to watch for