- The emergence of some fresh USD selling assisted EUR/USD to regain traction on Tuesday.
- A combination of factors boosted the market mood and weighed on the safe-haven USD.
- Investors now look forward to US macro data, FOMC minutes for a fresh directional impetus.
Following the overnight intraday volatile swings, the EUR/USD pair regained positive traction on Tuesday and was supported by the emergence of some fresh selling around the US dollar. The global risk sentiment remained well supported by the latest optimism over the progress toward remedies for the highly contagious coronavirus disease. Meanwhile, the formal start of US president-elect Joe Biden's transition to the White House cleared the uncertainty on the US political front. This, along with reports that former Fed Chair Janet Yellen could become the next US Treasury Secretary, further boosted investors confidence. This, in turn, triggered a strong rally in the equity markets, which weighed heavily on the greenback's safe-haven status and provided a goodish lift to the major.
On the other hand, the shared currency was supported by Tuesday's better-than-expected German economic data. The final version of the German GDP report showed that the economy expanded 8.5% QoQ during the third quarter of 2020 as compared to 8.2% estimated earlier. Separately, the German IFO Business Climate Index matched consensus estimates and dropped to 90.7 in November from 92.5 previous. The Current Assessment Index eased to 90 during the reported month as against a fall to 87.2 anticipated and helped offset slightly disappointing IFO Expectations Index, which came in at 91.5 for the reported month. From the US, the Conference Board Consumer Confidence dropped notably to 96.1 in November from 101.4 in the previous month and did little to provide any respite to the USD bulls.
The pair finally settled near the top end of its daily trading range and continued scaling higher through the Asian session on Wednesday. Bulls were seen making a fresh attempt to build on the momentum beyond the 1.1900 mark amid the prevalent upbeat market mood. There isn't any major economic data due for release from the Eurozone, leaving the pair at the mercy of the broader market risk sentiment. Later during the early North American session, a flurry of top-tier US macro data will influence the USD price dynamics and produce some meaningful trading opportunities. The US economic docket highlights the release of the preliminary (second estimate) US GDP report, Durable Goods Orders, Initial Weekly Jobless Claims and final Michigan Consumer Sentiment Index for November.
The key focus, however, will be on the release of the latest FOMC meeting minutes, which will be scrutinized for the possibility of any further policy easing by the Fed in December. The Fed's policy outlook will play a key role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the major.
Short-term technical outlook
From a technical perspective, nothing seems to have changed much for the pair. Bulls might still need to wait for some follow-through strength beyond monthly swing highs, around the 1.1920 region, before positioning for any further near-term appreciating move. Above the mentioned hurdle, the pair is likely to aim back to reclaim the key 1.2000 psychological mark. A subsequent break through YTD tops, around the 1.2010 region, should pave the way for an extension of the upward trajectory. The momentum could then push the pair towards the 1.2065-75 intermediate resistance en-route the 1.2100 round-figure mark.
On the flip side, immediate support is pegged near the 1.1855-50 region, below which the pair could slide back towards weekly lows, around the 1.1800 mark. Some follow-through selling could turn the pair vulnerable to accelerate the fall towards the 1.1750-45 support zone before eventually dropping to the 1.1700 mark. The downward trajectory could further force the pair to test the 1.1625 support ahead of the 1.1600 level.
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