Market Overview

Benefits From Broad-Based USD Weakness, Upside Seems Limited Ahead Of ECB On Wednesday


A combination of supporting factors helped the EUR/USD pair to regain positive traction and rally to over one-week tops on the first trading day of the week. The shared currency attracted some buying interest following the release of Euro-zone Sentix Investor Confidence index, which rose to -0.3 in April from -2.2 and marked the highest figure since November 2018. Expectations Index also rose for the third month in a row to -4.3, highest since May 2018, while Current situation index dropped for the eighth month to 3.8, lowest since February 2015.

The pair further benefitted from a broad-based US Dollar weakness, weighed down by Friday's mixed US jobs data that showed wage growth had slowed in March and a strong rally in commodity-linked currencies, which drew support from the latest leg of an upsurge in crude oil prices. This coupled with the disappointing release of the US factory orders - falling for the fourth consecutive month in February, exerted some additional downward pressure on the greenback, with traders shrugging off the latest bounce in the US Treasury bond yields. 

The pair, however, lacked any strong follow-through amid the latest reports that the US is threatening further tariffs on Europe, though the downside remained cushioned as investors now seemed reluctant to place any aggressive bets ahead of the latest ECB monetary policy update on Wednesday. Heading into the key event risk and in absence of any major market moving economic releases on Tuesday, the USD price dynamics might act as a key determinant of the pair's momentum, though repositioning trade might infuse some volatility around the major.

From a technical perspective, the pair is now holding comfortably above 23.6% Fibonacci retracement level of the late March/early April downfall and with technical indicators on the 1-hourly chart holding in the bullish territory, seems poised to 38.2% Fibo. level around the 1.1285 region. A follow-through buying has the potential to lift the pair further beyond the 1.1300 round figure mark, and 50% Fibonacci retracement level, towards testing its next hurdle near the 1.1325 supply zone. Sustained move beyond the mentioned barrier might continue fueling the recovery momentum, albeit any subsequent up-move seems more likely to remain capped at six-month-old descending trend-line resistance, currently near the 1.1365-70 region.

On the flip side, the 1.1250-45 region (23.6% Fibo. level) now seems to protect the immediate downside, which if broken might accelerate the slide further towards 1.1230 level en-route the 1.1210-1.1200 area. This is closely followed by the 1.1180-75 region, support marked by 61.8% Fibonacci retracement level of the 1.0341-1.2556 up-move, below which the pair might turn vulnerable to extend the slide further towards testing sub-1.1100 level. The later represents a descending trend-line support extending from August 2018 through low posted in Nov. 2018 and should help limit further downside, at least for the time being.



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Posted-In: ecb European UnionNews Eurozone Forex Global Markets General