EURUSD pair is expected to trade positive across the day and close well above 1.15 handle for the week but sharp upside move beyond weekly high’s at 1.1571 is highly unlikely regardless of increased risk appetite in market owing to headlines popping up from European markets. The common currency slipped against US Greenback yesterday owing to a healthy rebound action displayed by US dollar on profit booking activity in risk assets. This was further aggravated by bearish cues from ECB minutes update which stated that key members in governing council wish to keep interest rate at present level through summer of 2019 and may keep it unchanged even further depending on market conditions to ensure sustained convergence of inflation to levels below but close to 2% citing economic scenario in Euro area. Meanwhile news from Euro area that trade talks over removal of tariff’s on European market is still stalling on disagreement in scope of talks also hurt sentiment.
Broad Based Risk Appetite Underpins EURO Bulls
Aside from Sino-U.S tariff wars, U.S. President Donald Trump’s attempts at improving trade terms in his America First ideology also included countries Japan, Canada & Mexico and while China, Mexico and Canada seems to have found some common grounds to move forward with their trade negotiations, EU’s refusal to include agriculture sector and only focus on opening Auto market for trade negotiations is hurting negotiations with US with no possible deadline in sight also hurting investor sentiment surrounding common currency and this caused the pair fall below 1.15 handle for short while during yesterday’s trading session. However prevalent risk appetite in broad market helped risk assets recovers from yesterday’s lows and gain significant upper hand and this move was supported by comments from Fed Chair Jerome Powell’s speech last night.
While he failed to agree on views of economic slowdown in US citing strong labor market which he believes provided continued momentum to economic growth, his comments on rate hike plans mirrored other Fed members from earlier in the week as he claimed Fed is ready for patient approach on rate hike plans as inflation is low and under control allowing certain degree of flexibility on FOMC’s approach towards future monetary policy. This has caused investors to speculate that Fed will possibly refrain from rate hikes for all of 2019 hurting Dollar’s rebound action in broad market. Risk appetite further improved as news hit market that China’s Vice President Liu may visit Washington later this month for further high level trade talks which provided strong support to market bulls in Asian market hours today. As of writing this article the pair is trading at 1.1524 having managed to retain bullish price action since late North American market hours. Expected support and resistance for the pair are at 1.1500, 1.1480 and 1.1540, 1.1570 respectively.
This article was originally posted on FX Empire
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