EUR/USD analysis: US wishy-washy data boost the rally

EUR/USD Current price: 1.1756

  • Inflation steady, sales modestly down: Fed's future hikes in doubt.
  • EUR/USD heading toward 1.1890, where selling interest was strong early October.

The EUR/USD pair surged o 1.1852 early London, its highest since October 20th, amid dollar's sell-off. The greenback was hit last week by backs-and-forths surrounding the UX tax reform, entering this week with a soft footing as plummeting equities on risk-off took their toll. EUR/USD's bullish breakout on Monday was a consequence of solid growth in Germany, with today's early rally just being some follow-up of such advance. The EU released a minor figure today, its September trade balance result, which posted a surplus of €25.0B surpassing expectations of €21.2B, yet a reading that hardly affects the market.

The pair extends its gains after the release of US data, as Retail sales rose by less-than-expected, while inflation remained in-line with market's expectations. Sales were up by 0.2% during October, above the 0.0% expected, although sales ex-autos advanced just 0.1%, while the control group figure gained 0.2%, both below expectations.  Inflation, on the other hand, rose as expected by 0.1% in the month and by 2.0% compared to a year earlier, with a modest uptick in core YoY CPI up to 1.8% from 1.7%. Another negative note came from the New York Empire State Manufacturing Index for November, down to 19.4 from previous 30.2.

The EUR/USD pair trades now at 1.1856, maintaining its short-term bullish strength, despite technical indicators stand in extreme overbought levels, anyway heading north. As mentioned on a previous update, the 20 SMA has already crossed above the 100 SMA and is about to do the same with the 200 SMA well below the current level, reflecting the strong momentum upward and signaling more gains to come. The 1.1890 region is the next technical hurdle, as the pair was unable to surpass it early October. A break beyond it should lead to an extension up to 1.1936, September 25th high, moreover, if US equities extend their pre-opening slide.

Support levels: 1.1825 1.1790 1.1750                                                                    

Resistance levels: 1.1890 1.1935 1.1960

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