- The EUR/USD is looking north, having rallied for four straight trading days.
- A break above 1.1610 – a level where the 50-day moving average (MA) meets a key falling trendline – will likely remain intact as the Cohen’s guilty plea and trade war fears could hurt risk sentiment.
The four-day rally in the common currency has brought the EUR/USD close to 1.1610 – a level which marks the confluence of the 50-day moving average (MA) and trendline sloping downwards from the April 19 high and July 31 high.
However, a convincing break above the key hurdle could remain elusive as former Trump lawyer Michael Cohen’s testimony could hurt the risky assets. S&P 500 futures did drop 0.5 percent in early Asia in response to Cohen’s testimony, so the equities in Europe could trade on a cautious note.
Further, they have a bigger reason to trade risk averse – the US President Trump said yesterday night that the US would slap a 25 percent tariff on cards coming from the European Union. Trump’s comments are likely to put the focus back on the trade war and that could limit the upside in the common currency.
Not to forget, the Fed minutes, due later today, are likely to reinforce expectations of a September rate hike. It is worth noting that despite Trump’s criticism of Powell’s rate hike plan, the markets are still discounting 75 basis points of hiking by December 2019.
As a result, the USD could catch a bid ahead of the Fed minute release. At press time, the currency pair is trading at 1.1575.
EUR/USD Technical Levels
Resistance: 1.1610 (50-day MA + falling trendline), 1.17 (psychological hurdle), 1.1743 (5-month MA)
Support: 1.1502 (50-hour MA), 1.1468 (100-week MA), 1.1448 (50% Fib R of Jan 2017 low – Feb. 2018 high).
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