EUR/USD Analysis: Bulls seize control amid optimism over US stimulus plans

The EUR/USD pair built on its recent bounce from sub-1.1700 levels and continued scaling higher on Tuesday amid sustained selling around the US dollar. As investors watched the ongoing discussions between US lawmakers over the need and size of additional stimulus, the risk-on mood undermined the greenback's relative safe-haven status. The impasse over the next round of fiscal stimulus has been weighing on investor sentiment for months, especially after the expiration of the CARES Act at the end of July. House Democrats had passed two additional relief bills that were rejected by the Republican-controlled Senate. The latest from House Democrats was worth $2.2 trillion.

The US President Donald Trump raised hopes for the passage of the stimulus measures before the November 3rd presidential election and said that he was willing to accept a larger aid bill despite opposition from his own Republican Party. This, in turn, fueled expectations of more government borrowing and sparked a selloff on the US bonds. In fact, the yield on the benchmark 10-year US government bond jumped to four-month highs, which exerted some additional downward pressure on the buck and pushed the pair to one-month tops, around mid-1.1800s during the Asian session on Wednesday.

Meanwhile, the shared currency seemed unaffected by dovish ECB expectations and concerns about a steep rise in new coronavirus cases in Europe. There isn't any major market-moving economic data due for release on Wednesday, either from the Eurozone or the US. Hence, the broader market risk sentiment will continue to influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair on Tuesday broke through an important confluence hurdle near the 1.1800 mark. The mentioned barrier comprised of 50-day SMA and a near six-week-old descending trend-line. A subsequent move beyond the previous monthly swing highs, around the 1.1825-30 region, might have already set the stage for additional gains. Hence, some follow-through strength, back towards reclaiming the 1.1900 mark, now looks a distinct possibility. The momentum could further get extended towards the next major resistance near the 1.1935-40 horizontal resistance, above which bulls are likely to make a fresh attempt to conquer the key 1.2000 psychological mark.

On the flip side, any meaningful pullback now seems to find decent support near the confluence resistance breakpoint, around the 1.1800 area. Dips below the said resistance-turned-support might now be seen as a buying opportunity and remain limited near the 1.1765-60 horizontal zone.