EUR/USD Forecast: Set to advance in the uptrend channel amid triple optimism
|- EUR/USD has been holding its range amid market calm after partial trade deal.
- German figures, the IMF's forecasts, and Brexit headlines are eyed.
- Tuesday's four-hour chart is showing the pair is trading in an uptrend channel.
With so many moving parts, it is no wonder that EUR/USD investors are confused and keep the currency pair unchanged. However, bulls have reasons to be cheerful – or at least cautiously optimistic.
1) US-Sino talks: Chinese officials have refused to share the US satisfaction with "Phase One" in the trade deal – that mostly consists of trust-building gestures. However, this may be changing now as Beijing has issued a more upbeat statement. Hu Xijin, the editor of the Chinese outlet Global Times, tweeted:
Based on what I know, China-US trade talks made breakthrough last week and the two sides have the strong will to reach a final deal. Initial statement of the Chinese side is moderate. This is China's habit. It doesn't mean China's real attitude is not positive
Hu – considered a mouthpiece of the regime – tends to be downbeat and nationalistic. His fresh optimism is positive for risk assets and negative for the safe-haven US Dollar. An official statement has also expressed optimism.
2) Brexit: After a day that included pessimism about reaching a deal and calls for a "fresh political impulse", the mood has improved. Reports about a new British proposal have sent sterling higher, and the euro is also supported.
See GBP/USD Forecast: Breakout above 1.27? Three reasons behind the fresh rally
3) Less German pessimism: The ZEW Economic Sentiment came out at -22.8 points for October – still expressing pessimism among investors but these are better figures than expected.
The International Monetary Fund is set to publish new forecasts for Germany ane the euro-zone later today. While downgrades are likely, they are priced in.
The situation in Europe remains dire, but the markets have already adapted, leaving limited downside for the euro.
EUR/USD Technical Analysis
EUR/USD is trading within an uptrend channel that was formed when the currency pair hit new 2019 lows in early October. The general trend remains to the upside, momentum remains positive, and euro/dollar holds above the 50, 100, and 200 Simple Moving Averages.
All in all, bulls are in control.
Resistance awaits at Friday's highs of 1.1060, which capped the pair on Friday. Next, we find the mid-September peak of 1.1075. The next level to watch is 1.1115, which held it down earlier last month.
Substantial support is at 1.10, which stubbornly capped EUR/USD in early October and provided support after it broke higher. Moreover, the 50 and 200 SMAs are converging toward that line.
Further down, 1.0940 was a low point last week, 1.0905 provided support in early September, and 1.0879 is the 2019 trough.
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