At the start of the European session on Tuesday, November 16th, the EUR/USD is trading below the 1.14000 level.
- EUR/USD has recently ground upward after consolidating losses near a 16-month low.
- Yields fall as the ECB and Fed play down rate rise fears ahead of important data releases.
- The US stimulus package and the XI-Biden negotiations boost market confidence and intensify the corrective downturn.
EUR/USD fundamental forecast
During the European session, the EUR/USD is struggling to recover from a 16-month low. However, the pair had slid to a new low since July 2020 yesterday before rebounding off 1.1359 in the early Asian session.
After reaching a three-week high on Monday, US 10-year Treasury rates fell two basis points (bps) to 1.60 percent. Following the run-up to the highest since late 2020, the DXY is down 0.10 %, around 95.43, owing to lower bond coupons.
While tracing the yield drop, officials from the European Central Bank (ECB) and the US Federal Reserve (Fed) may have been linked.
However, ECB President Christine Lagarde ruled out rate rises until 2022 and emphasized the negative effects of the previous day’s monetary policy tightening.
Euro crosses were also down after European Central Bank director Christine Lagarde said on Monday that rate rises could do more harm than good at this time, a dovish stance in contrast to hawkish indications from other central bankers.
On Tuesday, the yuan hit a five-month high as traders welcomed talks between the US and Chinese leaders in Asia. The bulls will be excited if no unfavorable comments are made during the opening discussions between US President Joe Biden and his Chinese counterpart Xi Jinping.
Another reason limiting movement in the Asia session was speculation that Biden will soon reveal his choice for Federal Reserve chair, most likely Jerome Powell’s reappointment of Fed Governor Lael Brainard’s appointment.
Key data releases from EUR
Next on the docket is the Eurozone Q3 GDP data which will be announced today.
Key data releases from the US
From the US, we have US Retail Sales data for today. This can provide the pair with medium to high fluctuations.
However, the US Empire State Manufacturing Index’s stronger figures and a 31-year high in US inflation keep EUR/USD sellers confident.
Fears that the current deterioration of the bloc’s Covid situations could derail chances of economic recovery, even if the Eurozone’s Q3 GDP goes over 2.2 % QoQ predictions, put the key pair buyers to the test.
EUR/USD technical analysis: key levels in action
Although the pair has recovered from yesterday’s lows, it’s still trading below the 1.14000 level in the European session.
The pair is traveling below the 100-day MA daily, and the MACD is pointing downwards. The next resistance for the pair lies around 1.1431, the level it managed to cross yesterday. However, if the pair can breach this level, we can see an upward move towards 1.1500.
On the other hand, the support lies around 1.1326, the level it broke through in July 2020. So we can see the next support at 1.1286 if the pair manages to sip below the 1.1326-mark.