EUR/USD edges higher to mid-17s on ECB's Lautenschlaeger's remarks
The EUR/USD finally showed some signs of life despite the holiday in the U.S. and gathered momentum to rise to a fresh daily high at 1.1756. As of writing, the pair was trading a couple of pips below that level, gaining 0.2% on the day.
The pair's recent upsurge seems to be fueled by Sabine Lautenschläger's, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, comments. In a prepared speech, Lautenschläger said that factor holding down inflation seemed to be temporary and further added she thought that they should start reducing their bond purchases as early as next year.
- ECB's Lautenschlaeger: Low interest rates are justified; have side effects
On the other hand, after starting the week slightly lower, the US Dollar Index retraced its losses but failed to remain in the positive territory amid a lack of fresh catalysts. Nonetheless, the DXY's retreat on Monday seems to be technical in nature. In fact, the heightened odds of a December rate hike, which triggered the index's rally that started after the September FOMC meeting, is likely to dominate the pair's price action in the short-term. The CME Group FedWatch Tool shows that markets are pricing an 86.7% probability of 25 bps Fed rate hike before the end of the year.
- EUR/USD: a significant rebound appears unlikely near term – Danske Bank
Technical outlook
Despite today's modest rise, technical indicators for the pair don't provide any clues regarding the next short-term direction. The RSI on the daily graph is moving sideways slightly below the 50 mark. The initial technical support for the pair aligns at 1.1720 (daily low) ahead of 1.1680 (100-DMA) and 1.1610 (Jul. 27 low). On the upside, resistances could be seen at 1.1785 (Oct. 4 high), 1.1825 (20-DMA) and 1.1900 (psychological level).
- EUR/USD points to consolidation in the 1.1705/80 range – UOB