Back Above $1.1700

Post-FOMC reverberations initially influenced G10 price action overnight as Asia-Pac participants reacted to the latest FOMC meeting, which signalled that a tapering of asset purchases could start as soon as November and be completed in mid-2022. The Fed also provided a hawkish dot plot, although Chair Powell continued to delineate the tapering and rate hike processes. The initial impetus moderated as the Asia-Pac session progressed, with the DXY pulling back from a fresh one-month peak (EUR/USD also registered a one-month low in the process, at $1.1684). The bounce was aided by less worry re: Evergrande contagion, even with no news on a coupon payment on a US$-denominated bond issued by the company which is due today (note there is a 30-day grace period on the coupon payment, before a default is triggered). This leaves the rate 25 pips or so higher on the day, printing at $1.1710 into European trade.

• Our technical analyst notes that yesterday's price action reinforces the current bearish theme in the pair, with bears still eying key support in the form of the Aug 20 low/bear trigger ($1.1664). Initial firm resistance is seen the 20-day EMA ($1.1776).
• There are plenty of nearby FX option expires to be aware of come today's 10AM NY cut, which may contain price action $1.1700 (EUR3.5bn), $1.1745-50 (EUR2.3bn), $1.1790-00 (EUR1.6bn).
• Flash Eurozone PMIs headline the regional docket on Thursday, with an economic bulletin from the ECB also due. Elsewhere, we will hear from ECB Executive Board member Elderson.