- EUR/USD regains positive traction amid the emergence of fresh USD selling on Tuesday.
- Expectations for a 50 bps Fed rate hike in December act as a headwind for the greenback.
- The upbeat German Factory Orders data underpin the Euro and offer additional support.
The EUR/USD pair attracts fresh buying on Tuesday and for now, seems to have stalled the previous day's retracement slide from the vicinity of the 1.0600 mark, or its highest level since late June. The pair extends its steady ascent heading into the North American session and hits a fresh daily high, around the 1.0525-1.0530 area in the last hour.
The US Dollar recovery from over a five-month low touched on Monday runs out of steam ahead of the very important 200-day SMA, which, in turn, is seen offering some support to the EUR/USD pair. Rising bets for a relatively smaller 50 bps rate hike in December, to a larger extent, overshadow speculations that the Fed may raise interest rates more than projected. This keeps the US Treasury bond yields depressed, which, along with signs of stability in the equity markets, undermine the safe-haven greenback.
The shared currency, on the other hand, draws additional support from better-than-expected German data, showing that Factory Orders rose 0.8% in October against the 0.2% fall estimated. That said, worries about a deeper economic downturn and diminishing odds for a more aggressive policy tightening by the European Central Bank (ECB) could act as a headwind for the EUR/USD pair. In the absence of any major market-moving economic data, this warrants some caution before placing aggressive bullish bets.
The emergence of some dip-buying on Tuesday, meanwhile, adds credence to the recent breakout through a technically significant 200-day SMA. This, in turn, supports prospects for the resumption of the recent positive trend, which should allow the EUR/USD pair to make a fresh attempt to conquer the 1.0600 mark. Investors, however, might prefer to move to the sidelines ahead of next week's key data/event risks - the US consumer inflation figures, the FOMC decision and the ECB monetary policy meeting.
Technical levels to watch
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