The Euro finished higher against the U.S. Dollar on Tuesday as investors continued to express optimism in the growth prospects of the global economy amid the easing of tensions between the United States and China.
Although the Euro is rising, it’s actually the weaker U.S. Dollar that is driving the single-currency higher. After posting a strong performance for most of the year, the greenback has been on a price slide side mid-December when Washington and Beijing announced Phase One of their trade agreement. The news reduced the dollar’s appeal as a safe-haven asset.
On Tuesday, the EUR/USD settled at 1.1215, up 0.0015 or +0.14%.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. Taking out the December 25 high at 1.1313 will signal a resumption of the uptrend. The main trend will change to down on a trade through 1.1067.
The major range is 1.1413 to 1.0879. Its retracement zone is 1.1209 to 1.1146.
Long-term Fibonacci support is 1.1185.
The near-term range is 1.0879 to 1.1313. Its retracement zone is 1.1096 to 1.1045.
After clawing through a series of retracement levels, the EUR/USD is now in a position to expand the rally to the upside. Holding above the Fib level at 1.1209 will indicate the presence of buyers. If the rally gains traction over the near-term then don’t be surprised by an eventual test of the June 25 top at 1.1413.
It all comes down to the direction of the U.S. Dollar. Keep in mind that the greenback isn’t going down because the U.S. economy is weak. It is dropping because of safe-haven liquidation. The Euro is being boosted by a bullish outlook for the Euro Zone economy now that there is a trade deal in place, but at some point investors are going to ask for the evidence.
Reuters said on Friday that analysts did not attribute the move in the Euro to any specific new developments.
“I can’t see much reason for the movement in the FX market except end-year position squaring, or just being careful and cutting positions ahead of the New Year’s holiday and the start of 2020. As a result I wouldn’t draw any big conclusions from it,” said Marshal Gittler, currency analyst at ACLS Global.
The rally in the EUR/USD is mostly being driven by short-covering also. This first leg up took out some of the shorts. The real buyers will have to come in on the next correction to convince me that the single-currency will be moving higher over the near-term.
This article was originally posted on FX Empire
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