There was little consistency in the performance of the U.S. dollar on Wednesday despite the unexpected strength of the ISM Non-Manufacturing data. The jump in the ISM services index is an argument in favor of further Federal Reserve rate hikes. While this should actually be positive for the greenback, we saw EUR/USD and GBP/USD trading sideways.
Bearish momentum is not fading and it seems as if the pair tends to test the lower support zone at 1.32-1.3150 before starting a potential reversal. Based on the current downtrend channel we expect a short-term resistance to come in at around 1.33. Above 1.3315, a next target could be at 1.3350.
Looking at the economic calendar, the only interesting piece of data will be the ECB minutes due for release at 11:30 UTC. Investors brace for monetary policy changes at the European Central bank and expect such decisions to be made at the next ECB meeting on October 26. Speculation about monetary policy tightening at the ECB have a generally positive influence on the euro.
If the euro climbs back above 1.1810 and further 1.1835 it could be headed for a test of 1.19. On the bottom side, the focus remains on a break below 1.1680 and further 1.1660.
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