EUR/USD extends correction after Trump's comments on USD

• EUR/USD dropped further from multi-year highs. 
• US President Trump: Dollar will get stronger and stronger. 
• Greenback jumps, gold plummets. 

The EUR/USD pair dropped toward 1.2400 following comments from US President Trump. During an interview with CNBC, he said that his administration ultimately wants to see a stronger US dollar and that comments from Treasury Secretary Mnuchin were misinterpreted. 

The US Dollar Index erased daily losses and recovered from the lowest level since 2014. DXY bottomed earlier today at 88.43 and it just rose above 89.00. The yen suffered the most by Trump’s comments and lost ground across the board. 

Earlier today the EUR/USD peaked at 1.2536 during Mario Draghi’s press conference. ECB President talked down expectations about tapering in the short-term but at the same time sounded optimistic about the economy. Afterward, the pair lost bullish momentum and retreated. 

Recently it dropped from 1.2480 to 1.2395, in a few minutes during Trump’s interview. It was trading at 1.2400/10, around yesterday’s close. Despite holding to weekly gains, the short-term momentum changed dramatically.

Technical outlook 

“The pair continues ignoring extreme overbought conditions, consolidating around 1.2500 by the end of the  US afternoon, and with no clear signs of upward exhaustion in bigger time frames. The risk of a retracement on profit taking is big, but not granted”, said Valeria Bednarik, Chief Analysts at FXStreet. 

According to her, in the short-term, the 4 hours chart shows that technical indicators have lost their upward strength but also that they hold within overbought territory, as the price develops far above bullish moving averages, limiting the risk of a sharp decline, beyond a due correction.