The euro held onto overnight gains against the dollar on Tuesday after the European Union’s chief negotiator raised hopes of a deal for Britain to leave the economic bloc being struck in the coming weeks. Monday’s reports that Michel Barnier, the EU’s top negotiator, told a forum in Slovenia that it was “realistic” to expect a Brexit deal in six to eight weeks helped improve risk sentiment in market in favor of British Pound and EURO as successful negotiations on Brexit talks will be advantageous to European Union economy as well. As of writing this article, the pair is trading flat at 1.1600 up 0.06% on the day. The EUR/USD could gain altitude in the near-term, having defended the key 20-day MA support yesterday despite strong US data.
Positive Influence Surrounding USD in Last Two Session Failed To Create A Bearish Breakout
US wage growth hit a nine-year high in August, signaling that the tighter labor market is finally fueling wage-price inflation. As a result, the 10-year treasury yield jumped to a three-week high of 2.95%, lifting the USD higher across the board but the pair managed to hold steady above the 20-day MA level of 1.1575 indicating strong investor sentiment surrounding EURO. Further, the 10-year Italy-Germany yield spread has dropped more than 50 basis points in the last six days, indicating easing concerns regarding Italy’s fiscal health. As a result, the EUR looks set to gain altitude in the near-term. The rally could gather pace if the German ZEW survey indices, due for release at 09:00 GMT, beats estimates and pushes the currency pair above the trend line sloping downwards from the Aug. 30 low and Sep. 6 low.
Meanwhile, a weaker-than-expected data would be bad news, although only a daily close below the 20-day MA of 1.1575 would weaken the bull case. From technical perspective, A consolidation on top of 1.1600 could lead to a test of the dynamic resistance currently at 1.1635/40 (downtrend line from August highs) and above that area more gains are seen. The current bias still favors the downside with the price below key MA in the 4 hours chart, but a break below 1.1520/30 is needed over the coming sessions to clear the way to more losses. Expected support and resistance price levels are at 1.1585, 1.1526, 1.1500 and 1.1611, 1.1638, 1.1659 respectively.
This article was originally posted on FX Empire
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