Investing.com -- EUR/USD fell sharply extending its recent losing streak to five, ahead of the release of the Federal Open Market Committee's minutes from its July meeting on Wednesday afternoon.
The currency pair traded between 1.1019 and 1.1094 on Tuesday, before settling at 1.1028, down 0.49% on the session. Since rising by more than 1% on August 12, EUR/USD has erased all of its gains in the five successive sessions to close below 1.11 for the third consecutive day. Still, the euro remains up against its American counterpart by more than 1.8% over the last month of trading as investors continue to price in a possible interest rate hike by the Federal Reserve during its next FOMC meeting in mid-September.
EUR/USD likely gained support at 1.0808, the low from July 20 and was met with resistance at 1.1213, the high from Aug. 12.
Traders abandoned their long positions in the euro on Tuesday, ahead of the Federal Reserve's release of the minutes from its July meeting on Wednesday afternoon. While Fed chair Janet Yellen has indicated that the FOMC could lift interest rates at some point in 2015 if the economy and labor markets continue to show improvement, the Fed has been tight-lipped as to whether lift-off will occur in September.
Hours before the Fed minutes are made public on Wednesday afternoon, the U.S. Labor Department's Bureau of Labor Statistics will issue its Consumer Price Index (CPI) report for July. Last week, Fed vice chairman Stanley Fischer expressed concern with the lack of inflation in the U.S. economy due to slower than expected growth. The Fed would like to see long-term inflation move toward its targeted goal of 2% before it starts to raise interest rates.
For the July report, consensus forecasts expect the CPI to tick up 0.2% after solid monthly gains of 0.3% and 0.4% in June and May respectively. During its last monthly report, the CPI moved steadily upward in spite of record monthly declines in hospital services by 1.1%. The headline CPI also received a boost in June from a rise in energy prices, which increased by 1.7% for the month.
Economists will still keep a close eye on Core CPI, which strips out food and energy prices, for indications on whether the Fed could institute a rate hike at its next FOMC meeting, beginning on September 17. Analysts have forecasted modest increases in the Core CPI for July, by a consensus of 0.2% on a monthly basis.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.25% to an intraday high of 97.09 before falling back to 97.06 at the close. The dollar moved slightly higher after the U.S. Commerce Department said U.S. housing starts rose to a near eight-year high, while building permits fell sharply in July.
Elsewhere, a majority of conservative legislators in the German Parliament voted for a third Greek bailout in a proxy for a likely passage of the stimulus program on Wednesday in front of the full parliament. Ratings agency Fitch also upgraded its credit rating of Greece to CCC following the completion of last week's bailout.
Yields on the Greece 10-Year remained under 10% for the second consecutive session, while yields on the Germany 10-Year rose two basis points to 0.64%. Yields on 10-year Greek bonds are still up by more than 340 basis points over the last year. Meanwhile, yields on the U.S. 10-Year inched up two basis points to 2.19% ahead of Wednesday's Fed release.