• EUR/USD rallied hard on Monday amid broad-based USD weakness.
  • Dismal US data, trade uncertainty aggravated the USD selling bias.
  • The positive momentum stalled just ahead of the 1.1100 handle.

The EUR/USD pair caught some aggressive bids on the first day of a new trading week and finally broke through its recent trading range. A fresh wave of US dollar selling – further weighed down by disappointing manufacturing data – turned out to be one of the key factors that provided a strong lift to the major. The US ISM Manufacturing PMI dropped to 48.1 in November, down from 48.3 previous and marked the fourth consecutive month of contraction.

Focus remains on trade developments

The USD downfall accelerated further after the US President Donald Trump’s decision to restore steel and aluminium tariffs on Brazil and Argentina. The already weaker sentiment surrounding the buck deteriorated further after the US Secretary of Commerce Wilbur Ross told Fox News that Trump is willing to increase tariffs if there is no deal. The latest developments added to uncertainty over a potential US-China trade deal and kept exerting pressure on the greenback.

A broad-based USD weakness helped the pair to build on the previous session's modest bounce from near two-month lows and log the biggest single-day rise since September 17. The pair climbed back above the 100-day SMA, albeit a modest USD rebound during the Asian session on Tuesday kept a lid on any strong follow-through. The pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band below the 1.1100 handle.

In absence of any major market-moving economic releases, either from the Euro-zone or the US, the incoming trade-related headlines might continue to influence the USD price dynamics and act as an exclusive driver of the pair's intraday movement on Tuesday.

Short-term technical outlook

From a technical perspective, the overnight upsurge might have shirted the near-term bias in favour of bullish traders. However, it will be prudent to wait for some strong follow-through buying beyond the 1.1100 round-figure mark before positioning for any further near-term appreciating move back towards the double-top resistance, near the 1.1170-80 region, en-route the 1.1200 handle.

On the flip side, immediate support is now pegged near mid-1.1000s and is closely followed by the 1.1025 horizontal level. Failure to defend the mentioned support might negate prospects for any further positive move and turn the pair vulnerable to slide back towards testing sub-1.10 levels. The pair then could extend the downward momentum further towards the 1.0955-50 intermediate support ahead of the 1.0900 handle.

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