EUR/USD analysis: bullish strength eases, but downward scope still limited
|EUR/USD Current price: 1.0738
The EUR/USD pair retreated on Friday from a fresh 1-month high of 1.0782, but settled well above the 1.0700 threshold, as broad dollar's weakness dominated the FX board, following Fed's monetary policy meeting. The US Central Bank hiked rates as largely anticipated, but retain the stance of a slow pace for upcoming hikes, being far more conservative than expected. At the same time, other major Central Banks' policymakers, hinted the possibility of retrieving their facilities, further fueling dollar's easing. The BOE's meeting showed one MPC member voted to hike rates, whilst ECB's Nowotny said that the Government Council talked about the possibility of rising rates.
Over the weekend, the G-20 meeting ended with world leaders dropping a decade-long pledge to reject protectionism, unable to find common ground with the new US administration, replacing it with a light commitment to work on strengthening "the contribution of trade to our economies." This outcome will likely weigh on the USD, as it indicates Trump's desire for a weaker greenback. The week will likely start in slow motion, as the calendar is quite light in Europe and the US, until Wednesday.
After rallying for three weeks in-a-row, the daily chart for the EUR/USD shows that the pair settled above its 20 and 100 DMAs, both around 1.0610, but still below a 200 DMA, at 1.0856. It also shows that technical indicators have lost upward strength and began retreating from near overbought territory, but are far from suggesting a downward move, whilst the price stands above the 38.2% retracement of the post-US election slide at 1.0710. In the shorter term and according to the 4 hours chart, technical indicators are also retreating from overbought readings, but holding well above their mid-lines and with limited bearish strength, whilst the 20 SMA maintains a strong upward slope, converging with the mentioned Fibonacci support. Overall, the bullish potential eased, but there are no signs the pair has topped, and an extension beyond the mentioned high will likely result in further gains for the pair.
Support levels: 1.0710 1.0660 1.0635
Resistance levels: 1.0755 1.0790 1.0820
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