EUR/USD knocks on the door of the 100-hour moving average
Some good news from Italy has helped the euro move up a little on the day, with EUR/USD rising to a high of 1.1412 as buyers are now looking to attempt to break above the 100-hour MA (red line) @ 1.1404. Should buyers hold a break above that, the near-term bias in the pair turns more bullish.
However, buyers will still need to break above yesterday’s high before being able to revisit the week’s high of 1.1472. Currently, the resistance region between 1.1410-20 is proving to be a tough area for buyers to break above as it coincides with the 23.6 retracement level as well as swing region resistance from last Friday.
The current spin in EUR/USD is that Italy’s budget/debt issue is reaching a stage where the government and the European Commission are looking to reconcile things. The optimism there is still helping to keep the euro underpinned as Italian bonds are responding favourably to the news for now.
Aside from that, the dollar is facing some struggles as economic data continues to disappoint and there’s continued talks of the Fed slowing down – and possibly even pausing – its tightening cycle. The latter hasn’t really made its way to dollar pricing in a material way just yet but if whispers start to turn into real money flows, things can get ugly really fast for the greenback.
I still don’t see how Italy and the European Commission can break the budget impasse, but we’ll have to see if the government is willing to make any concessions over the next few days before EDP measures are invoked.
And the chart very much reflects the cautious optimism right now. The pair is looking to break back above the 100-hour MA to turn more bullish in the near-term again, but still sits below key resistance levels. Given thin liquidity over the next two days, a move back towards 1.1500 is quite possible on the back of the rhetoric above but I doubt we’ll see any extension beyond that.
As for downside levels, it’s hard to pick any for the time being with dollar sentiment not looking too hot. If you’re chasing a trade back lower, a break of the 200-hour MA (blue line) would be a good signal for an extension towards 1.1300. Otherwise, buyers are looking more poised at the current point in time.