EUR/USD analysis: Fed and US tax-reform woes to set the tone
|EUR/USD Current price: 1.1791
- ECB and Fed's meeting minutes to take center stage this week.
- US tax-reform jitters to keep weighing on the American dollar.
After Tuesday's bullish breakout the EUR/USD pair found a new comfort zone around 1.1800, where it closed the week, little impacted by political headlines or risk sentiment. The pair topped at 1.1860, rallying roughly 300 pips after bottoming the previous week at 1.1553, as better-than-expected German growth figures, coupled with a softer greenback, affected by the absence of clarity around the US tax-reform bill, and fresh macroeconomic first-tier clues, which sent investors dumping their USD-related assets, resulting in local equities plummeting to 4-week lows.
This coming week will see the release of the Minutes of the latest ECB and Fed meetings, ahead of December ones. The ECB has already set a monetary policy path for the next year, extending its bond-buying program to September 2018, but reducing it to €30B per month, a dovish cut that kept EUR's gains in check. As for the US Federal Reserve, the market has long away priced in a December hike, but 2018 moves are in doubt. Even more, inflation has been soft all through this year, with core inflation barely peaking up in October, so what can shock the market more this time is a dovish stance that puts December move in doubt. Also, investors will be paying attention to whatever happens with the planned tax-reform, as the Senate should vote on it around Thanksgiving.
From a technical point of view, the pair has turned bullish, yet the daily chart shows that the price settled right below its 100 DMA, with some follow-through beyond the moving average needed to confirm more solid gains ahead. In the same chart, technical indicators are aiming to pick up after a period of consolidation well into positive territory, favoring a new leg higher. The pair is also struggling around the 23.6% retracement of its latest bullish run, with the 38.2% retracement of the rally at 1.1745, being a key support for the upcoming days. Shorter term and according to the 4 hours chart, the outlook is neutral-to-bullish, as the price settled around a bullish 20 SMA, which converges with the mentioned 23.6% Fibonacci retracement, while the RSI hovers around 59, while the Momentum tries to re-enter positive territory, heading higher right below its 100 level.
Support levels: 1.1745 1.1700 1.1665
Resistance levels: 1.1830 1.1860 1.1890
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