VOT Research Desk
Following the significant drop seen on Monday, the EUR/USD pair decisively recovered on Tuesday. Early on Wednesday, the US Dollar was having trouble finding buyers, although the pair managed to move toward 1.0350 before losing momentum.
The pair has to break through the 1.0350/60 resistance zone in order to continue moving higher.
Although policymakers at the European Central Bank made conflicting statements about their intended next course of action, the Euro benefitted on Tuesday from the uptick in investor sentiment.
The US Dollar Index, on the other hand, declined by more than 0.5%, indicating that the US Dollar is once again weak. German PMI surveys revealed that the private sector’s business activity shrank at a slower rate than anticipated in early November, with the S&P Global Composite PMI ticking up to 46.4 from 45.1 in October.
In a same vein, the Composite PMI for the Eurozone increased from 47.3 to 47.8. Hawkishly, FOMC Chairman Jerome Powell stated that he anticipated the terminal rate to be moved upward in the dot plot for December.
Participants in the market will watch for signs that confirm a 50-basis point rate increase in December. According to market positioning, if investors keep cutting down on wagers expecting a 75 bps raise, the US Dollar could decline even more.
It’s important to remember that the US stock and bond markets will be closed on Thursday to observe the Thanksgiving Day holiday. Profit-taking may therefore increase market volatility as the American session draws to a close.
EUR/USD Technical Analysis
The previous EUR/USD four-hour candles all ended with higher closing prices, but the pair lost its bullish traction close to the 50-period Simple Moving Average (SMA), which is currently around 1.0350.
The static level of 1.0360 aligns just slightly above that SMA, providing a resistance zone in the range of 1.0350/60. If the pair clears that obstacle and begins to rely on it as support, it may aim for 1.0420 (the peak of the most recent rally) and 1.0480. (November 15 high).
On the downside, 1.0300 (20-period SMA, psychological level) serves as the first support level, followed by 1.0250 (Fibonacci 23.6% retracement) and 1.0200. (psychological level, static level).
