FX.co ★ EUR/USD

EUR/USD is slightly up on Monday in the Asian session despite weak buying pressure, now trading just above 1.1150 amid opposing factors. The common currency receives some support from the European Central Bank's (ECB) dovish stance, which suggests a December rate increase is likely due to the growing risk of higher inflation from rising oil prices. Furthermore, expectations of Middle East diplomacy weigh on the safe-haven US dollar and serve as a tailwind for the EUR/USD pair. In particular, Iranian negotiators had reportedly been engaged in their third straight day of negotiations with a Qatar mediator on Sunday to secure a deal for ending the US and Israeli attack on Iran. At the same time, US President Donald Trump stated that negotiations with Iran have been fruitful. However, he has not ruled out more military moves after the upcoming midterm elections on November 3rd. In addition to that, the leader of Iran, Mojtaba Khamenei, has directed his senior military generals to prepare themselves for a new showdown with the US and Israel and increase the number of options for retaliation. In addition, new Ukrainian strikes on Russian oil refineries continue to keep the geopolitical risk premium alive, and this, along with expectations of Fed rate hikes, should be a tailwind for the US Dollar and limit EUR/USD's upside potential. Based on the CME Group's FedWatch Tool, the probability of another interest rate hike by the US central bank in December is projected at 75%, supported by US economic figures released on Thursday that point to a solid economy amid ongoing price pressure. In addition, growing worries about France's high debt levels and political wrangling ahead of next year's presidential elections may help cap the EUR/USD pair. Market participants are awaiting the final Manufacturing PMIs for a boost ahead of the US ISM Manufacturing PMI; however, attention will shift to the US NFP on Friday. The EUR/USD currency pair sustains its short-term bearish momentum as it stays well below its 50-day SMA of 1.1379 and the overlapping resistance area formed by the 23.6% Fibonacci retracement at 1.1247 and the 38.2% retracement level at 1.1336. Resistance above comes from the 50.0% Fibonacci retracement at 1.1408, followed by supply levels at 1.1480 (61.8%), 1.1582 (78.6%), and the recent cycle high of 1.1712. Support below is expected at the structural support level of 1.1104.