Meaningful Moves More Likely in Second Half of the Week
EUR/USD is pushing higher after testing a notable support area, however, the pair might be confined to a tight range.
Volatility in EUR/USD and the FX markets in general has dropped off quite significantly over the past few weeks and there’s reason to believe this will remain the case, at least in the early week.
Market participants will be focused on the several risk events that are presented later in the week. It kicks off with the Fed meeting on Wednesday although there’s little expectation for a change of tone, especially following Friday’s NFP beat.
The UK election and ongoing developments in trade between China and the US will tend to be the focus. Sterling has rallied nearly 10% from its low in September as it is increasingly seen that a no-deal Brexit is off the table. The election takes place on Thursday.
How things develop in the US-China trade war this week will likely be the biggest driver for the markets. Traders will speculate if a deal will be reached before the December 15 deadline through the week and repricing assets accordingly. This stands to impact risk assets like equities and precious metals more than pairs like EUR/USD, however, the pair is likely to see a rise in volatility in the second half of the week.
The 50 and 100-day moving averages converged to create support for EUR/USD and the pair is seen advancing after mostly consolidating above the indicators yesterday.
The pair looks to be well supported and a catalyst might be needed for a bearish break. At the same time, there is a hurdle nearby around the 1.1090 level.
On a 4-hour chart, this level held the pair lower in the middle to late November. Further, a declining trendline falls near the horizontal level to create a confluence. This trendline is drawn by connecting the highs from the end of October and ahead of last week’s NFP report.
In the absence of a catalyst, a probable scenario is a range between the mentioned support and resistance areas. This falls roughly between 1.1060 and 1.1090.
- EUR/USD appears well support as the 50 and 100-day moving averages have come into play.
- A range appears in the next day or two as the bulk of the risk events this week fall in the second half of it.
This article was originally posted on FX Empire
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