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EUR/USD analysis: flirting with 1.0800 after setting a fresh yearly low

EUR/USD Current price: 1.0788

The EUR/USD pair resurged to its highest since mid November, ending the day near 1.0740 after briefly touching 1.0504, a fresh yearly low at the beginning of the day. Italy said  'No' to PM Matteo Renzi proposed constitutional reform, who resigned this Monday. Fears that the Italian banking system could collapse and  therefore spread to other European banks weighed on investors' mood, fueling risk-averse trading all through the Asian session. During the European morning however, EU authorities rushed to poor some cold water over the matter. Wolfgang Schaeuble, Germany's finance minister, said that there is no reason to talk about a euro crisis, while  the European Union's finance commissioner Pierre Moscovici, said he was confident Italian authorities will manage the situation. Stocks surged sharply, erasing all the negative sentiment among investors, and putting the greenback under selling pressure, resulting in the EUR/USD pair advancing up to 1.0796.

In the data front, the EU final November Services and Composite PMIs showed that the region's growth continued rising at a fast pace. The EU Markit Composite PMI printed 53.9, slightly below expected, but still at an 11-month high. Retail sales in the region, surged by 1.1% in October and when compared to the previous month, better than the 0.9% expected, although the Sentix Investor Confidence index for December fell to 10.0 from previous 13.1. In the US, the ISM Non-manufacturing PMI for November jumped to 57.2 from previous 54.8, beating expectations and the highest in over a year.

The EUR/USD pair ignored US data and continued rallying all through the American afternoon, strongly bullish in intraday charts, despite also being in extreme overbought territory in the short term after an almost straight 300 pips rally. According to the 4 hours chart, the pair can advance further, as it broke above its 20 and 100 SMAs, both now converging around 1.0640, while the Momentum and the RSI indicators maintain their sharp upward slopes within overbought levels. The pair has  a strong resistance in the 1.0800/10 region, where it also presents the 200 SMA in the mentioned time frame. Should the rally extend beyond it, the pair will likely extend up to the 1.0840/60 region, a major static resistance area.

Support levels:  1.0745 1.0700 1.0606

Resistance levels: 1.0810 1.0850 1.0890

View Live Chart for the EUR/USD

Author

Valeria Bednarik

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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