EUR/USD analysis: Break above 1.10 confluence barrier paves way for additional gains
|- The prevalent USD selling bias helped build on the recent recovery move.
- US-China trade truce provided some respite to the USD and capped gains.
The EUR/USD pair gained some follow-through traction and rallied to a three-week high level of 1.1063 on Friday amid persistent US Dollar selling bias. Firming market expectations that the Fed will cut interest rates again at its upcoming policy meeting on October 29-30 kept the USD on the defensive. This coupled with positive trade-related headlines further dented the Greenback's perceived safe-haven status against its European counterpart and remained supportive.
Bulls at the mercy of USD price dynamics
After two days of top-level trade negotiations, the US President Donald Trump on Friday announced that very substantial phase one deal was made with China. Trump further added that the agreement covered agriculture, currency and some aspects of intellectual property protections. Later, the US Treasury Secretary Mnuchin confirmed that the US has delayed a planned increase in taxes on $250 billion worth of Chinese goods as a part of the deal and China has agreed to buy $40 to 50 billion worth of US agricultural products.
The buck pared some of its daily losses following the announcement and prompted some late profit-taking around the major. Nevertheless, the pair ended the day with modest gains for the third straight session and also recorded its second consecutive week of a positive move. The pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band through the Asian session on Monday. In absence of any major market-moving economic releases from the Euro-zone, the pair seems more likely to extend its sideways consolidative trading action amid relatively thin liquidity conditions on the back of a holiday in the US markets in observance of Columbus Day.
Short-term technical outlook
From a technical perspective, the pair last week broke through an important confluence resistance near the key 1.10 psychological mark – comprising of a near four-month-old descending trend-line and 23.6% Fibonacci level of the 1.1412-1.0879 downfall. The mentioned handle might now help protect the immediate downside, which if broken might accelerate the slide further towards the 1.0960-55 horizontal support.
On the upside, immediate resistance is now pegged near the 1.1075-80 region (38.2% Fibo. level), above which the pair seems all set to surpass the 1.1100 round-figure mark and head towards testing another confluence resistance near the 1.1140-45 region. The mentioned barrier marks 100-day SMA and 50% Fibo. level and should now act as a key pivotal point for bullish traders.
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