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EUR/USD trades in tight range below 1.18 as DXY preserves daily gains

After falling below the 1.18 handle in the European session, the EUR/USD had a tough time retracing its daily losses as the demand for the greenback remained stable in the second half of the day. As of writing, the pair was trading at 1.1780, losing 40 pips, or 0.35%, on the day.

Today's downfall seems to be caused by a broad-based greenback strength, which lifted the US Dollar Index to a fresh daily high at 93.40, as investors gave up reading into last Friday's softer-than-expected inflation growth data. As we approach the end of the day, the DXY is at 93.33, gaining 0.38% on the day. 

  • Forex today: dollar benefits from less risk-off

Moreover, in his remarks, New York Fed President Dudley adopted a relatively hawkish tone, helping the greenback hold on to its daily earnings. Dudley suggested that low inflation readings wouldn't prevent the Fed from making another rate hike before the end of the year. When asked about markets' expectations for the plan to shrink the balance sheet to be announced at the September meeting, "I don't think the expectations of market participants are unreasonable," said Dudley.

  • Fed's Dudley: Still sees US growth at 2%

With most of the major European markets on holiday on Tuesday, the pair's volatility is likely to remain quiet until the NA session, in which the retail sales change from the U.S. is scheduled to be released. The market consensus is for the data to come in at 0.4% in July on a monthly basis after contracting by 0.2% in June. An upbeat reading could allow the DXY to extend its corrective upsurge, putting more pressure on the pair in the near-term.

  • Will the ECB speak now or forever hold its strong EUR peace? - ING

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "...the 4 hours chart shows that the price held a few pips above its 20 and 100 SMAs, whilst the Momentum indicator retreats within positive territory, with the RSI indicator, also heading lower around 46, anticipating some further slides ahead short term. To the upside,  the pair needs to advance beyond 1.1820 to be able to gain ground sustainably, aiming then to retest the year high of 1.1909."

According to the analyst, supports for the pair could be seen at 1.1770, 1.1735 and 1.1690 while resistances align at 1.1820, 1.1860 and 1.1910.

Market wrap: risk-off trade continues to fade - Westpac

Analysts at Westpac offered their wrap up of the US session and events. Key Quotes: "Market Wrap Global market sentiment: Concerns about North Kore
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