EUR is rising, but may meet some barriers

EUR/USD is edging higher amid the broad sell-off of the greenback and the overall risk-on sentiment. Let’s discuss what can stop its rally.

Fundamentals

The euro rally has started with the ECB’s statement last week, when the central bank addressed a stronger euro. Today China released upbeat economic indicators: industrial production, retail sales, fixed asset investment, and unemployment rate. All the data were better than analysts expected. Moreover, coronavirus hopes added optimism to the market as well. As a result, the market sentiment improved, which underpinned risker assets and weighed on the safe-haven US dollar.

New virus cases are rising in some parts of Europe, but investors shrug off that news for now. Besides, there is some uncertainty over Brexit as the UK Prime Minister Boris Johnson passed the Internal Market Bill, which violates the previous EU-UK agreement. The worsened relationship between both sides may lead to hard Brexit, which would negatively impact the Eurozone as well as the United Kingdom.

Technical tips

EUR/USD is trading above 50-, 100- and 200-day moving averages, signaling the bullish momentum. The RSI indicator is at quite high levels, but still below 70, which indicates that the euro is not yet overbought. There is a significant resistance of 1.1940, which the pair has failed to break several times. If it manages to cross it, the way towards the key psychological mark of 1.2000 will be open. Support levels are at the lows of September 8 and August 28 at 1.1770 and 1.1700, respectively.

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Kseniya Medik