EUR/USD analysis: modest gains as dollar suffers

EUR/USD Current price: 1.1577

• EUR lacks attractive enough to break higher, further gains at doubt.
• ZEW Survey expected to show that business sentiment continues deteriorating in the EU.

The EUR/USD settled below the 1.1600 figure after gapping lower at the weekly opening and hitting a daily high of 1.1605,  with the greenback being the worst performer at the end of the day. The American currency opened the week on a strong note, as political woes in the EU and the UK spurred risk aversion. Asian equities collapsed, on news that EU and the UK weren't able to reach a Brexit agreement over the weekend, while in Germany, Angela Merkel's conservative allies have lost their absolute majority in a regional election in the state of Bavaria, the worst result in almost eight decades. Dollar's demand eased during the European morning, as local share markets managed to gain some ground, while the greenback was further hurt by the release of US September Retail Sales. The report offered a mixed outcome, as sales rose by just 0.1% in the month vs. the 0.5% expected. Sales ex-auto resulted at -0.1%, missing the market's forecast of 0.3%, while July reading was downwardly revised to 0.2%. The control group, however, came in better-than-expected at 0.5%. Also, the NY Empire State Manufacturing Index for October was upbeat, printing 21.2 vs. the 20 forecast and the 19 previous.

The EU will release this Tuesday its August trade balance data, while Germany will release the ZEW survey, expected to show that sentiment deteriorated further, both in the EU and the country in October. The US will release multiple minor reports, with the most relevant being September Industrial Production and Capacity Utilization.

Meanwhile, the pair settled a handful of pips below its daily high and around the 38.2% retracement of the 1.1814/1.1431 daily decline at 1.1575. In the 4 hours chart, the pair was unable to sustain gains above a bearish 100 SMA, but trades above a bullish 20 SMA, with the strong upward slope of the shortest maintaining the risk skewed to the upside. Technical indicators in the mentioned chart held into positive ground, but lacking directional strength. A tough resistance area comes around 1.1620/30, where the pair has the 50% retracement of the mentioned decline and the 200 SMA in the mentioned chart. The risk will turn south on a break below 1.1530, the low set last Friday.

Support levels: 1.1575 1.1530 1.1500

Resistance levels: 1.1620 1.1660 1.1700

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