EUR/USD erases majority of daily gains, steadies near 1.1360
- US Dollar Index recovers above 97 in the NA session.
- Ifo survey from Germany disappoints on Tuesday.
- Housing starts and building permits rebound in November in the U.S.
The EUR/USD pair took advantage of the USD weakness during the first half of the day and rose above the 1.14 level for the first time in a week. However, with the dollar recovering a large part of its daily losses during the NA session, the pair retreated from that level and was last seen moving sideways in the 1.1360-70 region, where it was still up around 0.15% on a daily basis.
Earlier today, the data published by the Ifo Group revealed that business climate index, current economic assessment, and the expectations indexes in Germany all retreated from their November levels and fell short of analysts' estimates. Commenting on the data, Ifo economist Kalus Wohlrabe said that the German economy continued to cool down but there was no risk of a recession yet. "Uncertainty has increased further, Brexit is at the top of the agenda. Private consumption could be better-given increases in income, employment," Wohlrabe added.
On the other hand, ahead of tomorrow's critical Fed announcements, the US Dollar Index recovered above the 97 mark in the second half of the day to force the pair to reverse its course. The data published by the U.S. Census Bureau on Tuesday showed that the housing starts and building permits increased by 3.2% and 5%, respectively, following November's contraction. In addition to the upbeat data, reports of the Trump administration looking at other options to fund the border wall in order to avoid a government shutdown provided an additional boost to the buck. At the moment, the DXY is down 0.1% on the day at 97.05.
Previewing tomorrow's FOMC meeting, “The focus for markets will be on to what extent the FOMC follows through on the recent dovish communication shift, and lowers its projections for future rate hikes,” said ABN AMRO senior economist Bill Diviney.
Technical outlook by FXStreet analyst Yohay Elam
EUR/USD is now trading below the highs but still above the 50 and 200 Simple Moving Averages. On the other hand, Momentum remains muted.
1.1380 capped the pair around the turn of the month and is a pivotal point in the range. 1.1402 is the fresh high. 1.1424 capped euro/dollar last week, and 1.1445 was another high, already back in November.
1.1360 was the initial resistance line for the pair earlier in the day, and it coincides with the 200 Simple Moving Average. 1.1330 was a swing low last week, and it is followed by the double-bottoms of 1.1305 and the critical 1.1270.