FX.co ★ EUR / USD dynamics will depend on FOMC results

The USD index resumed its decline on Tuesday and sank below 93 points. The greenback remains under pressure as investors expect dovish rhetoric from the Fed.

In addition, growing hopes for an imminent COVID-19 vaccine make the greenback less attractive as a safe haven asset.

The positive sentiment on the markets was supported by the statistics from China. The world's second-largest economy posted higher-than-expected industrial production and retail sales for August.

The EUR / USD pair is growing amid optimism. The euro is trading against the US dollar in the region of $ 1.19, aiming to extend the winning streak to five consecutive days.

The euro continues to benefit from the ECB's contemplative approach to the EUR rate. Several representatives of the regulator previously announced that the Central Bank does not target the rate of the single currency.

At the same time, the main risk for the euro remains the situation associated with Brexit and the UK's adoption of the draft law on the internal market, which violates the provisions of the divorce agreement concluded earlier between London and Brussels. If this law is nevertheless passed, it will increase the likelihood of a hard Brexit and will have the greatest impact on the pound, but its sharp fall could drag the euro along with it.

So far, any drawdown in the euro is attracting buyers as traders prepare for a weaker dollar following the September FOMC meeting.

The fact of the Fed's transition to a new concept of inflation targeting has already been taken into account in the quotes, but the intrigue is as follows. In his August speech in Jackson Hole, Federal Reserve Chairman Jerome Powell was very tight on details, leaving them for monetary policy meetings. Therefore, investors will look for any hints of time limits for low rates or a possible link to macroeconomic data (for example, reaching the unemployment rate of 2%).

The USD depreciation bet has become one of the most popular strategies on the market in recent months. However, if there are no specifics on the part of the FRS again, it will be more difficult to short the dollar.

Updated FOMC point forecasts may also slow down the weakening of the greenback. Recall that in June, two fed leaders predicted the beginning of an increase in interest rates in 2022. Four or five managers can make such a forecast for 2023.

The main currency pair is still trading in a narrow range of 1.1800-1.1900. Most likely, the status quo will remain until the results of the FOMC meeting are announced on Wednesday, after which the Fed's monetary policy and the direction of the US dollar will be clarified.