EUR/USD eases below 1.18 as greenback gathers strength

After rising to a fresh session high at 1.1838 in the early NA session, the EUR/USD pair lost its momentum and fell below the 1.18 handle. As of writing, the pair was trading at 1.1797, losing 0.35%, or 44 pips, on the day.

This recent slump seems to be a product of the greenback strength. Following yesterday's sharp drop, the US Dollar Index struggled to make a meaningful recovery until a couple of hours ago. After the initial negative reaction to the macro data from the U.S., the index changed its direction and approached the 93 handle. At the moment, the index is at 92.95, up 0.3% on the day. 

Although today's data from the U.S. gave mixed signals regarding the economic growth in the second quarter and the inflation outlook, they weren't weak enough to force investors to continue selling the greenback. While the personal income growth disappointed the markets, a higher-than-expected PCE price index, favorite inflation gauge for the Fed, reading and an optimistic view of the manufacturing sector were able to counter the effects on the USD. 

Regardless of that last move though, it's too early to say that the pair has started a deep correction. The pair is still trading dangerously close to its 31-month high of 1.1845 while the US Dollar Index remains as fragile as ever amid an ongoing political drama in the U.S.

• EUR/USD: Time for a breather? - Rabobank

Technical outlook

On the upside, 1.1845 (Monday's high) could be seen as the initial hurdle for the pair ahead of 1.1870 (Jan. 11, 2015, high) and 1.1950 (Jan. 4, 2015, high). On the downside, supports align at 1.1720 (Monday's low), 1.1620 (Jul. 21 low) and 1.1500 (psychological level). The RSI on the H4 chart is moving sideways in between the 50 and the 70 mark, suggesting that the pair is likely to stay relatively quiet for the remainder of the session.

• EUR/USD still neutral/bearish near term – Scotiabank

Today's data from the U.S.

• US: Personal income decreased $3.5 billion (less than -0.1%) in June
• US: PCE price index increased less than 0.1%
• US: Manufacturing PMI registered 53.3 in July, up from 52.0 in June - Markit
• US: Economic activity in the manufacturing sector expanded in July - ISM