EUR/USD: Will the recovery gain momentum above 1.1600?
- DXY drops on reports of 1-year corporate tax delay.
- Fails to hold above 1.16 handle.
- A data-dry calendar today.
The EUR/USD pair failed to sustain the overnight recovery above 1.16 handle and drifted slightly lower, despite broad-based US dollar weakness, as the bulls await fresh impetus for the next push higher.
EUR/USD faces stiff resistance at daily pivot
The spot trades with modest gains so far this session, in response to fresh selling seen in the US dollar across its main competitors, following the WaPo reports of the GOP considering one-year corporate tax cut delay. The USD index flirts with daily lows of 94.72, down -0.07% on the day, extending the retreat from above 95 handle.
However, the further recovery appears to lack momentum, as the Treasury yields turn higher across the curve, with the 10-year yields moving away from 3-week lows of 2.302%. This could offer some support to the USD bulls in the day ahead.
On Tuesday, the EUR/USD pair witnessed a sharp sell-off to 1.1555, the lowest level since July, on the back of a solid rebound staged by the US dollar and Treasury yields, as divergent monetary policy outlook between both continents remained in play. Meanwhile, the speeches from Draghi and Yellen offered nothing of note on the monetary policy.
In the day ahead, the pair is likely to get influenced by the USD dynamics and risk trends, as the event calendar remains absolutely data-quiet.
EUR/USD Technical Levels
Valeria Bednarik, Chief Analyst at FXStreet, noted: “In the 4 hours chart, the 20 SMA gains strength downward above the current level, acting as a dynamic resistance in the 1.1610/20 region, while technical indicators in the mentioned chart have managed to bounce from nearly oversold readings, but remain within the negative territory. Beyond the mentioned resistance, the pair can correct higher, up to the critical 1.1660/70 price zone, where selling interest will likely resurge. The daily low at 1.1553 is the immediate support, with a break below it favoring a new leg lower which could end up testing the 1.1460 region. Support levels: 1.1575 1.1540 1.1510. Resistance levels: 1.1630 1.1670 1.1700.”