EUR/USD inter-markets: favoured by ‘Trumponomics’

EUR/USD seems to have resumed the weekly upside after yesterday’s pullback, so far succeeding to keep the trade above the recently broken critical barrier at 1.0700 the figure.

The softer tone in the greenback remains well and sound for the time being, as the initial euphoria following Trump’s win in early November as well as the reflation trade that emerged after it continue to fizzle out.

Further downside pressure on the US Dollar Index came last week after President Trump said the strong Dollar represents a headwind for the exports sector.

Adding to EUR strength, yields spread differentials between German and US money markets continued to diminish since the start of 2017, while USD speculative net longs have retreated significantly during the week ended on January 17.

In the meantime, EUR has quickly left behind the dovish bias from the European Central Bank at its meeting last week, helped by the continuation of the selling sentiment around the Dollar and pushing spot higher as a consequence.

All in all, the pair appears supported by the current bearish note surrounding the buck, although its extent remains to be seen as it stays highly Trump-dependent. In the short-term, the Fibo retracement (of the 1.1300-1.0339 drop) at just above 1.0700 offers interim support followed by the support line off YTD lows at 1.0339 (today at 1.0665) in case the resumption of the leg lower gathers steam. On the upside, recent tops in the 1.0770/75 band appears as the initial hurdle followed by the key 1.0820/50 area, where are located March and October 2015 lows.