EUR/USD firmer, surpasses 1.1400 on trade optimism

The upside momentum around the single currency remains well and sound at the beginning of the week and is now lifting EUR/USD to the area of daily tops in the 1.1420/30 band.

EUR/USD looks to trade, data

Rising hopes of a positive outcome from the US-China 2-day talks starting today have brought in renewed optimism into the risk-associated space, particularly after President Trump emphasized the better mood in recent negotiations.

Also bolstering the up move in spot and weighing on the buck, markets stay reluctant to the idea that the Fed could hike twice (or even once) this year. This view has apparently been reinforced by the dovish tilt in Chief Powell’s speech last Friday.

Today’s docket in Euroland includes November’s Retail Sales and the Sentix index for the current month in the broader region, while Germany will release its Retail Sales and Factory Orders figures. Across the pond, the ISM Non-manufacturing will be the salient event.

What to looks for around EUR/USD

The US-China trade dispute continues to be the ‘hot-potato’ issue so far, although recent poor results from the Chinese economy could push Beijing to clinch some deal in the near term. On the other hand, market participants continue to gauge the possibility of a ‘no-hike’ by the Fed this year, although the US economy keeps showing signs of solid growth as opposed to its European peer, which should leave EUR/USD within the current 1.12-1.15 range for the time being. In the meantime, the partial US shutdown remains unresolved. In spite of the little (if any) impact on markets, sentiment could be affected if the situation extends further. Regarding speculative positioning , EUR net shorts retreated to 4-week lows during the week ended on December 18, according to the latest CFTC report.

EUR/USD levels to watch

At the moment, the pair is gaining 0.27% at 1.1424 facing the next resistance at 1.1430 (high Jan.7) seconded by 1.1478 (100-day SMA) and finally 1.1497 (high Jan.2). On the downside, a break below 1.1309 (2019 low Jan.2) would target 1.1268 (monthly low Dec.14 2018) en route to 1.1214 (2018 low Nov.12).