US Markets

BUZZ-COMMENT-EUR/USD strength likely to be short-lived

Credit: REUTERS/DADO RUVIC

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.

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)

((john.noonan@thomsonreuters.com;))

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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