A key test lies ahead for EUR/USD buyers
Price now trades to a high of 1.1483 on the day and looks towards extending its recovery following a double-bottom bounce off support near the 1.1300 handle. The 38.2 retracement level @ 1.1498 is also another resistance level to look out for but it’s all about offers at the 1.1500 handle.
There is also swing region resistance to come from the May and June lows at around 1.1510 so that will be an area where sellers can lean on too. In short, watch out for key resistance around 1.1500-10.
In terms of significance, the 1.1500 level is more psychological in my view. Break above that and buyers will have more conviction to move towards a test of the 100-day MA (red line) again and it will shift the thinking away from moving back to 1.1300 in the short-term.
I’m still not entirely convinced by the offers seen in the dollar here until US traders confirm it but you can’t ignore what’s on the charts. The midterm election results have gone as expected so there shouldn’t be any real surprises for markets but traders so far are reacting towards the uncertainty of what a Democrat House may offer.
They are still holding a 26 seats majority over Republicans at this stage, and that’s still the median outcome which will lead to political gridlock in Congress. There’s still 23 seats to be declared so if that number drops, it could limit how much gridlock we could be seeing.
But as I’ve mentioned before, all this does is help to prevent fiscal stimulus that will be pushed forward by Trump, but it doesn’t derail the other factors that have been a driving force for markets this year i.e. trade and the Fed.
Sellers have good reason to hold the 1.1500 level for now but if that gives way, it’s going to be a good squeeze towards the upside for the pair.