EUR/USD inter-markets: potential test of 1.14 and above

Once again, and with no releases or significant events in Euroland, the USD-dynamics has been sustaining the price action around the pair throughout the week.

EUR/USD is now shedding some ground after reaching fresh multi-week tops near 1.1370 on Thursday, always against the backdrop of a persistent selling bias around the greenback, which has been emphasized after the FOMC minutes stressed the Federal Reserve remains in no rush to hike rates on Wednesday.

Adding to the case of a weaker dollar, Fed Fund futures prices have retreated to levels last seen in late June as markets continue to adjust to the recent FOMC minutes. According to CME Group’s FedWatch tool, the probability of a rate hike by the Fed at the December meeting has been trimmed to levels below 40%, while it remains at 15% for the next month.

Volatility tracked by VIX remains in depressed levels, although market participants seem to largely ignore this fact.

The ongoing correction lower is also being reflected in the German money markets, where yields across the curve keep navigating in a see of red and deflating from previous days’ tops.

All in all, there seems to be room for a test of the 1.1420/60 band (April/June peaks) on the back of upbeat momentum and specially after the recent breakout of the 2014-2016 resistance line and the base of the 8-month rising channel, roughly located around 1.1270 and 1.1310, respectively. This view faces risks coming from Fedspeak advocating a rate hike and USD-supportive data releases across the pond.