EUR/USD Forecast: Overbought? So what, Brexit lifts the euro, and more may be in store

• EUR/USD has resumed its gains, hitting the highest since late August.
• Optimism about Brexit and also USD weakness are behind the move.
• Monday's four-hour chart is pointing to overbought conditions.

With a hard exit from the EU ruled out and hopes for a second referendum – euro bulls are unstoppable – even though Brexit is mostly a British development. Once again, events in London affect the continent. 

UK Prime Minister Boris Johnson has been forced to ask for a delay to Brexit. That is the backstop in case he is unable to pass muster for his deal in parliament – and support continuing piling up. Moreover, the opposition is set to introduce an amendment calling for a confirmatory vote – or another referendum – even better news for markets. 

Why is it positive for the euro? Several euro-zone countries will be adversely affected by an abrupt exit of the UK. Ireland, Belgium, the Netherlands, and France are set to suffer. Germany may lose some 100,000 positions in case of a no-deal exit. 

Moreover, the global economy is at a delicate point. Trade wars have hit the Chinese economy, and this slowdown has depressed German exports. The world's second-largest economy reported a 6% annual growth rate in the third quarter, the lowest since the 1990s. Christine Lagarde, the incoming President of the European Central Bank, has repeated her concerns about the global economy. 

A hard Brexit would add to the global deceleration. 

For more about Brexit, see Three positive Brexit developments

USD weakness

The US Dollar's slide has also contributed to the EUR/USD's advance. Weak Retail Sales numbers for September – published on Thursday – continue weighing on the greenback.

Moreover, Richard Clarida, Vice-Chair of the Federal Reserve, has not ruled out a rate cut later this month. With markets pricing the odds of another reduction at above 80%, investors see Clarida's silence as an implicit nod to cutting rates. 

The economic calendar is light today, leaving room for Brexit developments, and perhaps events related to the US-Sino trade talks.

EUR/USD Technical Analysis

The Relative Strength Index on the four-hour chart is above 70 – indicating overbought conditions. This situation has been going on for several days and may eventually trigger a downward correction. Nevertheless, the general trend is upbeat. The currency pair broke above uptrend resistance, enjoys upside momentum, and trades above the 50, 100, and 200 Simple Moving Averages. 

The next resistance line is 1.1190, which capped EUR/USD in mid-August. It is followed by 1.1225, which was a stubborn cap earlier that month. Further above, 1.1245 was that month's high point. 

Support awaits at 1.1140, which worked as resistance in mid-October. It is followed by 1.1115, which held it down in mid-September. Further down, 1.1075 was a high point around the same time, and 1.1060, a cap from mid-October closely follows it.