- EUR/USD attracts fresh buying on Tuesday and draws support from a modest USD weakness.
- The lack of follow-through buying beyond the 1.0930-35 confluence warrants some caution.
- A break below last week’s swing low is needed to support prospects for any meaningful slide.
The EUR/USD pair regains some positive traction following the previous day's directionless price moves and spikes to a three-day peak, around the 1.0935 area during the Asian session on Tuesday. Spot prices, however, struggle to capitalize on the move beyond the 100-hour Simple Moving Average (SMA) and retreat a few pips in the last hour.
The US Dollar (USD) remains on the defensive for the second successive day and turns out to be a key factor acting as a tailwind for the EUR/USD pair. That said, the Federal Reserve's (Fed) hawkish outlook helps limit the downside for the USD and caps the upside for the major. Traders also seem reluctant to place aggressive bets around the shared currency in the wake of worries about economic headwinds stemming from rapidly rising borrowing costs. The fears were fueled by the disappointing release of flash Eurozone PMIs on Friday, which now leaves the European Central Bank (ECB) in a policy dilemma.
From a technical perspective, the 100-hour SMA coincides with the 50% Fibonacci retracement level of the recent corrective decline from the monthly peak touched last week. This makes it prudent to wait for sustained strength and acceptance above the 1.0930-1.0935 confluence before positioning for any further gains. With oscillators on the daily chart holding comfortably in the positive territory, the EUR/USD pair might then climb back to the 1.1000 psychological mark. Some follow-through buying has the potential to lift spot prices towards the next relevant hurdle near the 1.1080-1.1090 supply zone.
On the flip side, the 1.0900 mark now seems to protect the immediate downside ahead of the 23.6% Fibo. level, around the 1.0880 region. This is followed by last week's swing low, around the 1.0845 zone. A convincing break below the latter might prompt some technical selling and accelerate the fall towards 100-day SMA, currently around the 1.0810-1.0800 area. Failure to defend the said support levels will shift the bias in favour of bearish traders and make the EUR/USD pair vulnerable to weaken further below the 1.0765-1.0760 intermediate support, towards challenging the 1.0700 round-figure mark.
EUR/USD 1-hour chart
Key levels to watch
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