The common currency now needs to settle above 1.0500 in order to challenge the 20-DMA in the near term
The euro has been recovering for the third session in a row on Tuesday as the safe-haven dollar keeps retreating from fresh twenty-year peaks registered last week around 105.00. EURUSD regained the 1.0460 intermediate resistance and was last seen approaching the 1.0500 figure, followed by the descending 20-DMA, currently at 1.0570.
The greenback failed to hold above 104.00 as profit-taking continues amid further improvement in risk sentiment across the globe. Following solid gains in Asia, European stocks opened higher today, with US stock index futures pointing higher in early pre-market trading. However, the overall bearish trend in the global financial markets remains in place, and the current bounce looks like a short-term correction amid oversold conditions.
The common currency now needs to settle above 1.0500 in order to challenge the mentioned 20-DMA in the near term. Should this moving average cap the buying pressure, another sell-off could be expected as the buck may attract renewed demand somewhere around 103.40-103.30.
Later in the day, the pair will be affected by retail sales data out of the United States, followed by Powell’s speech. If the report disappoints, the selling pressure surrounding the USD would intensify, thus pushing the euro to fresh intraday highs
In a wider picture, the upside potential surrounding the European currency remains limited as the USD index is unlikely to peak yet. The greenback will continue to outperform due to the policy divergence theme even as the ECB is getting more hawkish of late.
Technically, the USD index could threaten the 103.00 mark in the short term if the 103.20 zone gives up. On the upside, recovery above 104.50 would pave the way towards fresh multi-year tops beyond 105.00.