EUR/USD: Bulls gather pace for further upside, 1.1250 on sight

The EUR/USD pair extended gains and printed fresh session tops at 1.1227 post-European open, before taking a breather to now waver around 1.1220 levels.

EUR/USD driven by politics, central banks’ actions

After a brief consolidation phase around 1.12 handle, the major finally extended the bid beyond the last, as a retreat in the US treasury yields dragged the greenback further into the red against its main competitors.

Moreover, negative tone seen around the European equities, in the wake of increased cautiousness ahead of the FOMC meeting, also provided fresh impetus to the funding currency Euro. The European indices are down -0.50% to -0.65% so far.

However, the upside appears to lack follow-through, as monetary divergence between both continents continues to weigh on the spot, partly offsetting the optimism backed by a strong Macron win in the round 1 of the French parliamentary election.

Meanwhile, Fed funds futures contracts imply a roughly 85% probability of a June rate hike, and then only about even chances for another hike this year. 

Focus now shifts slightly away from politics, as fundamental drivers are likely to shape-up markets this week, with a fresh batch of macro news from the US docket, which includes CPI, retail sales, industrial production and all-important FOMC decision.

EUR/USD Technical Levels

Selena Nicholas, Investment Analyst at XM noted: “A daily close below 1.1200 would target further support at 1.1100 and 1.1000. Below this, the bias to the downside could gain momentum with scope for prices to fall to the 200-day moving average around 1.0817. A break below this would change the bigger picture and the medium-term trend would shift to neutral from bullish.”

“The market would have to rise above 1.1300 to resume the uptrend and target 1.1400. the bullish crossover of the 50-day moving average above the 200-day MA and the rising ichimoku cloud are supporting the bullish outlook for now. Meanwhile, the RSI and MACD remain in bullish territory,” Selena added.