EUR/USD analysis: dollar to get a boost from "fake news"

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1893

The US Senate approved on Saturday a tax overhaul, tax reform bill closer to approval.
Former US President advisor Flynn pleads guilty of lying to FBI, but news "mistake" only to benefit Trump.

The EUR/USD pair closed the week just marginally lower at 1.1893, as the greenback plunged after headlines indicating that US President Trump former advisor, Michael Flynn, pleaded guilty on lying to the FBI, saying that Trump, as a candidate, directed him to make contact with Russia. However, the media that reported it, ABC, later corrected, saying that in fact, those instructions were given after Trump was already elected and that Flynn was asked to contact Russia on issues including working together to fight ISIS. There's a subtle but heavy-weight difference in contacting Russia to interfere elections before becoming elected, or afterward, to work together. Given that the correction to the main article was announced after the close, opening gaps should be expected across the board. On Saturday, the US Senate approved a tax overhaul, putting the tax reform bill one step closer to be approved by the Houses, which will add another dose of high volatility to the weekly opening.

Beyond political turmoil, the week will bring multiple macroeconomic readings, with the US monthly Nonfarm Payroll report outstanding on Friday. This time, the report may have an additional weight on investors, ahead of the next week Federal Reserve "live" meeting. Anyway, and from the fundamental point of view, it will be a light start to the week, with more relevant figures starting to be out on Tuesday.

From a technical point of view, the EUR/USD pair reached a top of 1.1960 this past week, and a floor of 1.1808, having modestly corrected after rallying up pretty much straight since bottoming at 1.0553 early November, which in the daily chart, signals that the risk remains towards the upside, above all taking into account that the pair met buying interest around its 100 DMA and while the 20 DMA advanced below the largest, now about to reach it. Technical indicators in the mentioned chart have corrected overbought conditions, now directionless above their mid-lines, also indicating limited dollar demand. Shorter term, and according to the 4 hours chart, the pair presents a neutral-to-positive stance, holding a handful of pips above a flat 20 SMA, and with technical indicators heading nowhere within positive territory. Gains beyond 1.1960 should favor an extension up to the 1.2000 figure, but gains beyond the level seem quite unlikely, given the latest dollar-positive news.

Support levels: 1.1860 1.1820 1.1785

Resistance levels: 1.1930 1.1960 1.2000

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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