BUZZ-COMMENT-EUR/USD strength likely to be short-lived
Oct 20 (Reuters) - The euro rallied close to 1.1800 on Monday when the dollar moved broadly lower, but the strength may prove short-lived as it was driven by hopes that a U.S. coronavirus aid package will be agreed to at the 11th hour and partly by short-covering.
Optimism for a deal faded during U.S. afternoon trade, but the EUR/USD remains elevated for the time-being . The outlook for the European economy is cloudy at best, as coronavirus infections are rising and the resulting lockdowns will weigh on economic activity .
While the FX market remains hopeful talks between U.S. House Speaker Pelosi and Treasury Secretary Mnuchin will result in a deal before the Nov 3 presidential election, any agreement on a bill will have to pass the Republican-controlled Senate where opposition to a bigger stimulus bill remains stubborn .
If an aid bill fails to pass before the election, the USD and JPY will likely rise on safe-haven flows, which would probably increase due to the possibility of a contested election result if the outcome is close.
EUR/USD faces resistance at the 55-day moving average at 1.1795 and strong resistance between 1.1830-60 where the October trend high (1.1831) and 61.8 Fibonacci retracement of the 1.2014-1.1612 decline (1.1860) stand in the way.
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(John Noonan is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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