FOREX UPDATE - EUR/USD

Wednesday’s most commented data release, the US Q2 unit labour costs, was probably not enough on its own to encourage traders into short euro-positions.
In fact, the numbers actually raised some sceptical eyebrows. But the apparent
strong rise in wage growth certainly nourished the view that the evening’s Beige Book would reveal an upbeat/inflationary outlook for the US economy.

This was precisely what the small, but growingnumber of dollar-bulls wanted to see: at last, a fundamental reason for selling the single-currency. So far, the only (unspoken) reason
euro-bears have for selling is that the price has failed to rise.

Unfortunately for them, the Beige Book was rather mixed and the euro rebounded from its 1.2775 low to close unchanged on the day.
We doubt that ‘creeping’ euro pessimism has faded despite the day’s disappointment. Take the oil price, for instance. On the way up, right or wrong, one of the popular arguments was that high crude prices would increase the global demand for dollars. Now that oil has
retreated to a 12-month low, nobody is suggesting weaker dollar demand.

However, although the euro-bearish preference is clear, the positions are still likely to be small.

Thus, even beyond the first 1.2890 resistance, a squeeze might not extend further than 1.2990.
To the downside, nearby supports are still at 1.2740 and at 1.2670.