EUR/USD extends gains and approaches 1.1700 as USD tumbles

• US dollar drops sharply versus its G10 rivals; DXY down by 0.58%.
• Euro among top performers holds to gains after ECB.
• EUR/USD heads for highest daily close in a month.

The EUR/USD broke a multi-day range to the upside and jumped toward 1.1700. Recently it printed a fresh monthly high at 1.1686 and remains near the top, with the bullish tone intact, supported by a decline of the US dollar across the board.

The decline of the greenback and technical factors are boosting EUR/USD further to the upside. The pair is trading at the highest level since late September, extending the recovery from 1.1523 (October 12 low).

After US data and ECB, focus starts to turn to FOMC

Economic data from the US showed mixed signs, with jobless claims (initial and continuing) falling more than expected to their lowest level since March 2020 and Q3 GDP data presenting a larger than forecast slowdown to 2% (consensus: 2.7%).

The European Central Bank, as expected kept its monetary policy unchanged. The next meeting will be more relevant, considering it will make decisions regarding QE programs.

“Despite Lagarde’s very dovish signals and overall appearance, EUR/USD followed the rates market higher. In our view, this is likely a temporary correlation and likely to soon be replaced by more downside risk as the European economy underwhelms amid inflation surprises”, warn analysts at Danske Bank.

The Federal Reserve will meet next week. At Danske, analysts see the Fed probably leaning more in to their hawkish views. “On net, we continue to forecast 1.10 in 12M EUR/USD.”

Technical levels