- EUR/USD gained some follow-through traction on Tuesday and rallied to over two-week tops.
- The Franco-German proposed recovery fund, upbeat ZEW survey results remained supportive.
- A late pullback in the US equity markets benefitted the safe-haven USD and capped the upside.
The EUR/USD pair built on the previous day’s goodish positive move and gained some follow-through traction on Tuesday. The shared currency remained well supported by the Franco-German proposal for a €500 billion European recovery fund and got an additional boost from encouraging data from the Eurozone. In fact, the German Economic Sentiment bounced further to 51.0 in May from 28.2 previous. The gauge for the broader Euroland improved to 46 during the reported month as compared to -12.1 anticipated.
Meanwhile, the latest optimism over encouraging data on COVID-19 vaccine trial remained supportive of the upbeat market mood. The risk-on rally in the global equity markets prompted investors to continue dumping traditional safe-haven currencies, including the US dollar. Weaker US housing market data and the Fed Chair Jerome Powell’s testimony before the Senate Banking Committee did little to impress the USD bulls or hinder the pair’s intraday momentum to over two-week tops.
However, reports that the US drugmaker Moderna had provided insufficient data to determine the vaccine’s efficacy led to some weakness in the US equity markets. This, in turn, forced investors to take refuge in the safe-haven dollar and kept a lid on any further gains for the pair, instead prompted some selling at higher levels. The pair retreated over 50 pips from daily tops and finally settled with only modest gains. Despite the pullback, the pair managed to hold above the 1.0900 round-figure mark and regained some positive traction during the Asian session on Wednesday.
Moving ahead, market participants now look forward to the Eurozone economic docket – highlighting the final CPI print and the preliminary estimate for the Consumer Confidence for May – for some impetus. Later during the US trading session, the Minutes of the latest FOMC meeting will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities.
Short-term technical outlook
From a technical perspective, the pair on Tuesday was rejected near the top end of a near eight-week-old trading range. The mentioned barrier, around the 1.0975 region, should now act as a key pivotal point for short-term traders, which if cleared might be seen as a fresh trigger for bullish traders. Bulls might then make a fresh attempt to cleared the very important 200-day SMA barrier, currently near the 1.1015 region, before eventually aiming to reclaim the 1.1100 round-figure mark.
On the flip side, sustained weakness below the 1.0900 mark might accelerate the fall towards the 1.0845 horizontal support. Some follow-through selling has the potential to drag the pair back towards the 1.0800 mark ahead of the trading range support near the 1.0775 region. Failure to defend the mentioned support levels might now turn the pair vulnerable to break below the 1.0700 mark and slide further to retest YTD lows, around the 1.0635 region.
Roz has been engaged in the financial markets since 2017, specializing in Foreign Exchange, Before joining to FOREX IN WORLD she start to learn forex trading related information.
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