EUR/USD steadies around 1.1350, looks to post highest daily close in three months

• EUR/USD gained traction on broad USD selloff on Tuesday.
• Eurozone economy contracted by 3.6% in the first quarter.
• US Dollar Index slumps below 96.50 ahead of Wednesday's FOMC announcements.

The EUR/USD pair spent the first half of the day below 1.1300 but started to edge higher during the American trading hours. After advancing to a daily top of 1.1365, however, the pair has gone into a consolidation phase and was last seen trading at 1.1348, where it was up 0.5% on a daily basis. Nevertheless, the pair remains on track to register its highest daily close since March 10th.

Earlier in the day, the data published by Eurostat showed that the eurozone economy contracted by 3.6% on a quarterly basis in the first quarter. Although this reading was slightly better than the previous estimate and the market expectation of 3.8%, the shared currency failed to attract investors.

USD selloff continues ahead of FOMC

In the second half of the day, the greenback came under strong selling pressure and allowed the pair to turn north. In the absence of significant macroeconomic data releases from the US, the sharp fall seen in US Treasury bond yields caused the USD to weaken against its peers.

With the 10-year T-bond yield losing around 6% on the day, the US Dollar Index is down 0.4% at 96.31. On Wednesday, the FOMC will announce its interest rate decision and release the monetary policy statement.

The Federal Reserve is not expected to make any changes to its policy rates. However, it will be interesting to see if the policy statement adopts a more optimistic tone following last Friday's impressive Nonfarm Payrolls report.

Technical levels to watch for