The EUR/USD pair advanced beyond parity on Monday as market sentiment improved, and the dollar retreated versus most peers. At the same time, investors continued to assess last week’s Fed statement and nonfarm payrolls data.
At the time of writing, the EUR/USD pair is trading at the 1.0025 area, 0.67% above its opening price, after bottoming at a daily low of 0.9905 earlier in the session.
The pair is advancing for the second day in a row, approaching a key resistance area as selling pressure continues to surround the U.S. dollar despite increasing yields. While the NFP report showed solid job creation, the increase was offset by the rise in the unemployment rate, which reached 3.7% in October.
Ahead of October CPI report on Thursday, investors are now wondering whether the Fed will slow down the rate increases going forward. The WIRP tool suggests that a 50 bps hike is already priced in for the December meeting, slightly favoring a 75 bps increase.
Meanwhile, the greenback, measured by the DXY index, is down for a second consecutive day, posting a 0.58% daily loss at the 110.15 area.
Across the pond, data showed German Industrial Production expanded by 0.6% on a monthly basis in September. The reading came much better than the expectations of a 0.8% fall and helped the euro gain traction earlier in the session.
Regarding the European Central Bank policy, another 75 bps is about 60% priced in for the December meeting, although swap markets are pricing a lower terminal policy rate between 3.0-3.25%.
From a technical perspective, the EUR/USD short-term outlook looks bullish, with indicators gaining traction on the daily chart and the pair trading above the 20-day SMA.
The EUR/USD is about to retest the 100-day SMA as resistance, currently around 1.0045, which has not been broken out since February. Hence, a breach of that level could improve the EUR/USD medium-term outlook. The next resistance level is at 1.0100, and September’s monthly high is at the 1.0200 area.
On the other hand, the next support level is seen at the 0.9900 area, followed by the 0.9880 zone, where the upper end of a broken descending channel stands, and the 20-day SMA at around 0.9857.