- A better mood across markets weighs on the US Dollar.
- FOMC meeting kicks off on Tuesday: 25 basis points rate hike not a done deal.
- EUR/USD moves with a bullish bias, strong resistance ahead.
An improvement in market sentiment weighed on the US Dollar and pushed EUR/USD to the upside. The pair rose for the third day in a row, climbing back above 1.0700, and it is looking at last weekly highs. The EUR/USD pair turned positive for the month as the banking crisis persists and ahead of the FOMC meeting.
The newsflow during the weekend was not light. Market participants learnt that UBS is set to buy Credit Suisse and that main central banks, including the Federal Reserve (Fed) and the European Central Bank (ECB), agreed on coordinate action to provide liquidity through US Dollar swap lines by increasing the frequency of 7-day maturity operations from weekly to daily.
On Monday, EBC President Christine Lagarde spoke at the Hearing of the Committee on Economic and Monetary Affairs of the European Parliament. She stuck to last week’s monetary policy statement. French President Emmanuel Macron’s government survived a no-confidence vote. Regarding data, Germany published the Producer Price Index (PPI) report that showed the annualized rate at 15.8%, above the 12.4% expected. The numbers confirmed that inflation is still too high, falling at a slower pace than forecasts. On Tuesday, the ZEW survey will be released in Europe. The key economic numbers are due on Friday with the PMIs.
The US Dollar pulled back on Monday as Wall Street indexes posted gains, and US yields ended flat. The greenback is somewhat under pressure ahead of the FOMC decision and following recent development regarding the banking crisis. US yields on Monday finished flat after rebounding from fresh monthly lows.
EUR/USD short-term technical outlook
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The daily chart shows the Euro continues to move higher, rebounding from the 100-day Simple Moving Average (SMA), currently at 1.0560. The upside could extend toward last week’s highs near 1.0755. A consolidation above 1.0750 should point to more gains, while a failure to break this level could trigger a correction, targeting the 20-day SMA at 1.0635. The 20-day SMA is starting to turn north.
The 4-hour chart shows some exhaustion signs to the upside in the very short term, which could favor a consolidation phase and a potential pullback before a test of last week’s high. A slide under 1.0635 would be a negative development for the bulls, exposing 1.0600.
View Live Chart for the EUR/USD
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
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