EURUSD Rally May Have Further to Go Before ECB Meeting
- EURUSD positive move higher aided by US dollar weakness.
- ECB meeting may highlight economic headwinds.
EURUSD Rallies Ahead of ECB Meeting
A weaker US dollar and talk that the EU may grant Italy more time to comply with its budget recommendations, has seen the pair move higher at the start of the week and hit a near three-week high of 1.1440. Above here, 1.1473 and the November 7 high at 1.1500 come into play. The pair have also made five higher lows in a row and trade back above both the 20- and 50-day moving average.
EURUSD Daily Price Chart (May - December 10, 2018)
A report over the weekend suggested that the EU may give Italy an additional six months to comply with its budget recommendations, a sign, if true, that the current frosty relationship between the two may be beginning to thaw. The ECB rejected Italy’s deficit target of 2.4% and wants it cut down to below 2.0%. Ahead, the last ECB meeting of the year, where the Italian budget will be one area under discussion. ECB President Mario Draghi may also warn that inflation pressures in the single-bloc are weakening while growth remains elusive, and the central bank may trim their growth and inflation forecasts.
The US dollar basket (DXY) starts the week on the back foot and has broken the uptrend that has been in place since late-September, and it is now trading below the 20- and 50-day moving average and nears a three-week low.
US Dollar Basket Daily Price Chart (May – December 10, 2018)
IG Client Sentiment Datashows investors are currently 53.8% net-long EURUSD – a contrarian bearish signal – however recent daily and weekly positional shifts give us a mixed EURUSD trading bias.
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