The US Dollar was seen consolidating previous session's slump to its lowest level since Nov. 11 on receding hopes that the Trump administration will be able to deliver on tax reforms and infrastructure spending. The setback of a key healthcare reform bill has now dampened expectations for a fiscal spending boost from the US President Donald Trump and weighed heavily on the greenback.
Investors on Tuesday now look forward to the release of Conference Board's Consumer Confidence Index, later during the NA session for some immediate respite for the US Dollar bulls.
The pair surged through the 1.2600 handle for the first time since early Feb. before retracing around 50-pips and finally settled around mid-1.2500s. The pair seems to regain some traction on Tuesday, with bearish sentiment surrounding the buck being an exclusive driver of the pair's movement in absence of any major market moving economic releases from the UK. Meanwhile, the UK PM Theresa May is expected to trigger Article 50 of the Lisbon treaty on Wednesday and ahead of the key event, market players are likely to remain cautious, which might hinder any further up-move.
Monday’s pull-back from nearly two-month tops seems to have reaffirmed strong supply near the 1.2600 handle. Moreover, a follow through buying interest above this key hurdle is likely to confront a strong barrier at a short-term descending trend-line, currently near 1.2635-40 region. However, a convincing break through the descending trend-line resistance should pave way for extension of the pair’s up-move, even beyond 1.2700 round figure mark, towards testing the very important 200-day SMA resistance near 1.2715 region.
Meanwhile on the downside, retracement below mid-1.2500s is likely to find support near 1.2520 horizontal level, below which the pair is likely to slide back below the key 1.25 psychological mark and head towards testing 1.2470 support area. A follow through selling pressure could extend the profit taking slide back towards 100-day SMA support, currently near 1.2420 region.
EUR/USD
The shared currency got an additional boost from upbeat Germany Ifo business climate index, which rose to the highest reading in nearly six years since July 2011. The data lifted the pair marginally above the very important 200-day SMA hurdle and the 1.0900 handle for the first time since mid-Nov. 2016. The up-move, however, stalled and the pair retreated back to 1.0860 level. There are no macroeconomic data due for release on Tuesday and hence, the pair remains at the mercy of the US Dollar price dynamics.
Failure to extend the up-move beyond 200-day SMA might prompt additional profit taking slide towards 1.0820-15 support area, marking 50% Fibonacci retracement level of 1.1300-1.0341 downslide. A follow through retracement below this immediate support is likely to drag the pair back towards 1.0775-70 support area before the pair eventually drops to retest 38.2% Fibonacci retracement level support near the 1.0700 handle.
On the upside, 200-day SMA near 1.0890 region remains immediate hurdle, which if cleared decisively now seems to lift the pair towards 61.8% Fibonacci retracement level resistance near 1.0930-35 area. Momentum above 1.0930-35 resistance should continue boosting the pair further towards reclaiming the key 1.1000 psychological mark.
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