In the Asian session on Tuesday, September 21, the EUR/USD trades slightly higher on cautious optimism.
- After the previous day’s turmoil, the EUR/USD tries to rebound on Tuesday.
- The US Dollar Index pares early gains but maintains over 93.00.
- Fears about indebted China’s Evergrande, as well as pre-Fed concern, continue.
EUR/USD fundamental forecast
The pair was pretty consolidated at the start of the trading session before seeing a sharp increase during the trading session, reaching an intraday high of 1.1740.
The EUR/USD is trading at 1.1727 at writing, up 0.04% for the day.
DXY initial gains
Following US House Speaker Nancy Pelosi’s remarks, the US Dollar Index fell from its early highs to 92.30.
In the most recent development, US House Speaker Nancy Pelosi expressed her desire for a $3.5 trillion infrastructure plan but stated that she is open to any changes.
The bill’s chances of passing the House and Senate this week remained dismal due to a stalemate among Democrats in both chambers.
As investors assess China’s property behemoth Evergrande default concerns, an increase in US 10-year benchmark rates to 1.32 percent restricts the greenback’s fall.
On Tuesday, the offshore yuan remained around a one-month low, while safe-haven currencies like the dollar gained as investors sought refuge from a possible default.
The dollar had already been gaining predictions that the Federal Reserve will announce the start of stimulus reduction at its two-day policy meeting on Wednesday.
Meanwhile, Fed Chairman Jerome Powell is anticipated to reduce monthly asset purchases during the two-day FOMC meeting on Wednesday, but this should not be seen as an impending rate rise.
Key data releases from EUR
There isn’t much on the calendar that can influence EUR moves. Germany, on the other hand, is holding elections this weekend. While the event will not be game-changing, a growth-friendly SPD/Greens coalition would undoubtedly confirm that the Euro has begun to dig out a bottom.
Key data releases from the US
From the US, we have an FOMC meeting tomorrow. In addition, Fed Chairman Jerome Powell will speak on Friday. This can provide the pair with medium fluctuations.
As the EUR calendar stays empty, investors will shift their focus to US Current Account data, Housing Starts, and Building Permits for fresh trade information.
EUR/USD technical analysis: key levels in action
During the slow start to Tuesday’s Asian session, EUR/USD maintains the previous day’s defensive performance around a monthly low.
By press time, the main currency pair was hovering around 1.1730. Although the pair’s corrective recovery was initiated by six-week-old horizontal support on Monday, two-month-old support, now resistance, as well as the 50-day MA, provide hurdles to recoup gains under bearish MACD signals.
As a result, any comeback becomes less meaningful unless it clears the immediate horizontal obstacle around 1.1755, then the 50-day MA level near 1.1795, and finally the 1.1800 level.
Even if the EUR/USD crosses the 1.1800 level, the bulls will be tested by the mid-August peak at 1.1805 and a falling resistance line from late June around 1.1895.