The US dollar began to strengthen before the minutes came out, and the release helped push the US currency higher. The minutes brought nothing new for market participants. The FOMC’s narrative frustrated investors who were hoping for a significant improvement in the economy following massive monetary and fiscal stimulus.
According to the minutes of the FOMC meeting held on July 28-29, the committee members noted ongoing uncertainty in the economy, while some members acknowledged the need for additional support measures to bring inflation back to the 2% target.
In the upshot, the single currency dropped from 1.1949 to 1.1830 (-119 bps).
Today’s macro agenda (GMT 3)
13:00 UK: industrial trends orders (August)
14:30 EU: monetary policy meeting accounts
15:30 US: weekly initial jobless claims, Philadelphia Fed manufacturing index (August); Canada: home price index (July)
17:00 US: CB leading index (July)
The decline in EURUSD halted at the 135th degree of the Gann angle. This points to a reversal, but the trend might not have legs. In line with our forecast, we expect to see a recovery to 1.1893 (rebound towards the balance line). We are not looking for upside above the balance line, since bullish divergence has not shaped up on the hourly timeframe.
The FOMC minutes knocked the wind out of buyers as bullish momentum ran out of steam. Given yesterday's plunge, the euro runs the risk of correcting lower to 1.1775. If the price action returns to the balance line before 13:00 (GMT 3), then a recovery to 1.1966 could take hold by Tuesday, August 25. Gold price is also sluggishly on the rise.