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EUR/USD hits fresh highs on Italian budget headlines near 1.1400

  • Euro consolidates gains versus US dollar, remains in range. 
  • Key event ahead: ECB meeting on Thursday. 

The EUR/USD pair climbed to 1.1386, hitting a fresh daily high, boosted after Italian Prime Minister Conte proposed a 2.04% deficit target for 2019 to the European Commission. He said the new target was possible because budget measures were less costly than the first elaborations. 

From the top, EUR/USD pulled back and is trading at 1.1365, up 50 pips for the day. Most gains were driven by a weaker US dollar across the board and risk appetite. The Dow Jones is up 1.75% while the Nasdaq gains over 2%. The US Dollar Index retreat from weekly highs back below 97.00. The move higher also took place amid a rally of GBP/USD amid expectations that UK PM May will win the confidence vote. 

The mood in financial markets continued to improve amid the release of the Huawei CFO, coupled with comments from US President Trump announcing his intention to intervene in the case if necessary in order to avoid a rise in tensions in US-China relations. Also, China’s willingness to open its markets to foreign
companies further improved the mood in the markets. However, in Europe, the latest news announcing a vote of confidence on Mrs May, with results due late this evening, warrant the uncertainty, while tomorrow’s focus will be on the ECB meeting
,” said BBVA analysts. 

EUR/USD Levels to watch 

The euro erased yesterday's losses and completed a recovery after testing yesterday the 1.1305 critical support level. The pair remains within a trading range, unable to break under 1.1300 and also to hold on top of 1.1400. 

Ahead of the Asian session, to the downside, support levels might be located at 1.1340 (20-hour moving average), 1.1300/05 and 1.1275. On the upside, immediate resistance is seen at 1.1400, 1.1425 and 1.1440/45 (Dec 10 high).

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