EUR/USD trying to stake a claim on 1.1600

The Euro is flattening out ahead of Tuesday's Asia market session after a surprising turnaround from the week's bearish start.
US Dollar weakness could be the main driver in the major pair, and further EUR weakness can't be ruled out.

Joshua Gibson FXStreet

The EUR/USD is testing near 1.1585 after slipping slightly back from Monday's peak of 1.1606 on broader US Dollar weakness, and Euro bulls are trying to scrape together a floor for a second launch into higher territory after picking the pair up off of the week's opening lows of 1.1535.

The Euro saw a firm recovery in Monday's action after a bearish start to the trading week, and a softening of Greenback buyers' positions has helped the Fiber reverse recent bearish action to push back into bullish turf.

European Trade Balance data will be dropping later Tuesday, but the low-tier indicator is unlikely to have a significant impact as Italy headlines continue to dominate the EUR space.

Italy went ahead with a government budget that intentionally violates Brussel's wishes, expanding the budget deficit and putting further strain on the Italian debt pile, which is already straining towards 130% of GDP. Continued showdowns over Italy's budget can be expected in the near future, which could prove to be a sizeable headwind for the EUR as the fiscally-conservative European Union tries to stare down the spend-happy Italian government.

EUR/USD Levels to watch

The Fiber chart is primed for a bullish continuation, but momentum remains weak and bidders could find themselves in a volatility trap, according to FXStreet's own Valeria Bednarik: "the pair settled a handful of pips below its daily high and around the 38.2% retracement of the 1.1814/1.1431 daily decline at 1.1575. In the 4 hours chart, the pair was unable to sustain gains above a bearish 100 SMA, but trades above a bullish 20 SMA, with the strong upward slope of the shortest maintaining the risk skewed to the upside. Technical indicators in the mentioned chart held into positive ground, but lacking directional strength. A tough resistance area comes around 1.1620/30, where the pair has the 50% retracement of the mentioned decline and the 200 SMA in the mentioned chart. The risk will turn south on a break below 1.1530, the low set last Friday."

Support levels: 1.1575 1.1530 1.1500

Resistance levels: 1.1620 1.1660 1.1700

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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