EUR/USD analysis: peripheral factors lift the EUR, fears cap

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1302

Italy decided to maintain its budget unchanged, challenging EU's Commission requests.
US inflation increased by the most in nine months in October.

The EUR/USD pair peaked for the day at 1.1347, as the dollar came under pressure amid improving market mood, mostly related to early hopes the UK Cabinet could approve the Brexit deal. Adding to the positive mood were European equities, recovering sharply after an early slump, although finally closing in the red. US equities also started with a good tone, but the continued rout in tech-shares weighed them lower. The common currency held on to gains despite a big disappointment from Germany, as economic growth contracted for the first time since 2015, coming in at -0.2% QoQ, as a result of global trade disputes. For the whole EU, Q3 GDP matched the market's expectations of 0.2%, while quarterly employment change disappointed, up by 0.2% vs. the expected 0.4% advance. Meanwhile, Italy stuck to its 2019 budget with a 2.4% deficit target and a growth forecast of 1.5%. The EU Commission is expected to make an update on Italy next Wednesday, Nov 21st.

US October inflation increased by the most in nine months, with the core CPI up by 0.3% MoM and by 2.5% YoY, this last, surpassing the previous estimate of 2.3%. The numbers were in-line with the market's expectations, failing to impress. Thursday will bring EU September trade balance, while the US will release October Retail Sales., seen increasing 0.5% MoM. The US will also publish weekly unemployment numbers and regional manufacturing indexes.

The pair eased from the mentioned high following a collapse in Pound, finishing the day around 1.1300. The 4 hours chart indicates that the pair lost part of its upward strength, barely holding above a bearish 20 SMA which converges with the 23.6% retracement of the latest daily decline, as technical indicators lost upward strength, the Momentum above its mid-line and the RSI at around 50. The pair failed to retain gains above the 38.2% retracement of the mentioned decline after nearing the 50% retracement of the same slump at 1.1355, with gains beyond this last needed for a firmer advance.

Support levels: 1.1240 1.1215 1.1180

Resistance levels: 1.1325 1.1355 1.1390

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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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