The EUR/USD pair also rose as the US dollar index (DXY) plunged.
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- Buy the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.0850.
- Timeline: 1-2 days.
- Set a sell-stop at 1.0925 and a take-profit at 1.0850.
- Add a stop-loss at 1.1050.
The EUR/USD pair continued its recovery as the US dollar index (DXY) continued its downtrend. The pair jumped to a high of 1.0950, the highest point since mid-August. It has surged sharply from last year’s low of 1.0450.
US dollar index sell-off continues
The euro continued its recovery this week after some mixed news from Europe. On Friday, Eurostat confirmed that the European economy contracted by 0.1% in Q3 as consumer and government spending dropped.
On a positive sign, Moody’s reiterated its Baa3 credit rating on Italian bonds and revised its outlook from negative to stable. This is important because Italy is the third-biggest economy in the region after Germany and France.
The EUR/USD pair also rose as the US dollar index (DXY) plunged. The dollar has dropped to a low of $103.5, which was much lower than the year-to-date high of $107. It has fallen to an eleven-week low as investors bet that the Fed has finished raising rates.
This view also explains why US equities and risky assets like cryptocurrencies have bounced back. The Dow Jones, Nasdaq 100, and S&P 500 indices continued rising on Monday and are now sitting at their highest point in months.
Similarly, cryptocurrency prices also soared, with Bitcoin rising to $37,000 and the total market cap of all digital coins surged to over $1.4 trillion. This is a sign that investors have embraced a risk-on sentiment.
The next important EUR/USD news to watch will be the latest FOMC minutes, which will come out on Tuesday. These minutes will provide more information about what to expect in the coming meetings.
There are signs that the Fed and the European Central Bank (ECB) will maintain their interest rates intact in the coming meetings.
EUR/USD technical analysis
The EUR/USD pair continued its bullish trend on Tuesday. On the 4H chart, the pair moved above the upper side of the Andrews Pitchfork tool. It also neared the 61.8% Fibonacci Retracement level. Also, it remains above the 50-period and 25-period moving averages.
The Money Flow Index (MFI) is nearing the overbought point while the Relative Strength Index (RSI) has moved above 70. This is a sign that the pair is having a bullish momentum.
Therefore, the pair will likely continue rising as buyers target the important resistance level at 1.1100, which is the 78.2% retracement point.