EUR/USD analysis: flat for the day on back and forth sentiment
|EUR/USD Current price: 1.1487
- Wall Street once again overshadowing risk aversion coming from Europe.
- USD intraday strength directly linked with Treasury yields.
The EUR/USD pair remained under selling pressure, with government bond yields and equities led the way. The common currency remained undermined by tensions between the EU and Italy. Deputy PM Salvini was again crossing the wires through the European morning, saying that the government won't backtrack on the budget even if local yields keep soaring. He also said that the country is not planning to leave the EU, but would like to see a change in Union rules. Italian bond yields rose to their highest since 2014, leading to initial losses within European indexes, although Wall Street's strength poured some cold water on risk-averse sell-offs. Meanwhile, US Treasury yields reached fresh multi-year highs with the yield on the benchmark 10-year Treasury note flirting with 3.26% ahead of the opening and following a holiday Monday that kept the bonds' market closed but later retreated, weighing on the greenback in the final session of the day. Further helping the pair to recover ground were headlines suggesting a Brexit deal is just around the corner.
A scarce macroeconomic calendar exacerbated sentiment-related trading, with the EUR/USD pair falling to 1.1431, its lowest since August 20, before recovering some ground, closing the day little changed just below the 1.1500 level. German data was mixed as the trade balance posted a better-than-expected surplus in August of €18.3B, although exports fell by 0.1%, as imports dropped by 2.7% MoM. In the US, the NFIB Business Optimism Index fell to 107.9 in September, while the IBD/TIPP Economic Optimism Index for October up to 57.8 vs. the expected 54.6. This Wednesday, the most relevant macroeconomic event will be US September PPI, expected to have bounced after falling in August.
The intraday recovery fell short of affecting the negative tone of the pair, as, by the end of the US session, it continues trading below its 20 SMA in its 4 hours chart, after failing to surpass the level at the beginning of the day, while technical indicators have recovered from their daily lows but lost upward momentum within negative readings. The immediate resistance continues being the 1.1500 level, but the pair would need to firm up beyond 1.1565 to shrug off the negative tone, at least temporarily.
Support levels: 1.1460 1.1420 1.1475
Resistance levels: 1.1500 1.1530 1.1565
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