EUR/USD looks to consolidate for a bit as upside momentum stalls
The pair is struggling in an attempt to break above the key trendline resistance (1.1179 today) and the 1.1200 level and that has seen the recent momentum higher stall.
Despite the narrowing in the Treasury-Bund yields spread, the euro is failing to find an additional lift to break higher as the market continues to digest the happenings in the market over the past week or so.
There are still a lot of things to consider currently as the market reaches a sort of crossroads in trying to figure out what is going to happen next as we see central banks around the world ease policy but with the coronavirus outbreak still ongoing.
Is the euro going to adopt a similar shorts unwinding as we saw over the past week if the market turns more sour again? Or is it going to falter as risky assets are able to catch a brief reprieve as central bank stimulus steps into the picture?
Then, what about the virus outbreak in Europe itself? What happens if things get worse? Is fiscal stimulus on the way? What about a monetary policy response by the ECB?
From a fundamental standpoint, there are plenty of questions to be answered. But from a technical standpoint, we can try to use that to understand the bias of the market.
Any major upside break still requires a firm move above the key trendline resistance and the 1.1200 level. Further resistance is then seen from the 31 December high @ 1.1239.
Meanwhile, any downside pressure needs to break below the 200-day MA (blue line) @ 1.1099 and in that sense, a key focus will turn towards the 1.1100 level. The near-term picture only adds more reason to focus on the figure level as well:
The 100-hour MA (red line) rests at 1.1111 with the 23.6 retracement level of the swing move higher sitting nearby at 1.1110 and the lows this week hovering nearby 1.1100.
As such, if we are to see a retracement and the start of a trend back lower in the euro, it will come on a break below those key levels and specifically below 1.1100.
That will offer traders a clearer picture of which side of the fundamentals that the market is starting to lean on as we look towards the end of the week. In short, we are now sitting in a battle between breaking firmly above 1.1200 or a pullback under 1.1100 again.
