EUR/USD inter-markets: expect further consolidation

EUR/USD keeps the sideline theme around the 1.0880 region so far this week. Sellers remain unable to break below the recent low at 1.0860, while occasional bullish attempts seem to have found a tough barrier around the 1.0900 neighbourhood for the time being.

The broader scenario of USD-strength remains unaltered and sustained by firmer expectations of a Fed’s move by year-end. According to CME Group’s FedWatch tool, the probability of higher rates in December has climbed to nearly 70%, always based on Fed Funds futures prices.

In the same line, yields in German Bunds are navigating in a ‘sea of green’ during the European morning, while volatility tracked by VIX has plummeted to fresh lows, all supporting EUR, or somewhat limiting the pair’s downside.

All in all, the lack of relevant catalysts or events in both Euroland and the US economy in the very near term should leave the outlook on the pair pointing to further consolidation.

Regarding FX, the next relevant support aligns at the key area of 1.0820 (March’s low). If breached, YTD low in the vicinity of the 1.0700 handle will surely emerge on the radar. On the opposite side, if a bullish attempt manages to progress further north of 1.0900 the figure, the next significant hurdle is located around 1.0950, where coincides July’s low and the 2014-2016 resistance line. Once surpassed, the 1.1040/60 band is next up, where converge the post-ECB spike, the 20-day sma and the 4-month resistance line.