EUR/USD looks to close day above 1.18 as greenback struggles to recover

After spending the first half of the day in a consolidation phase below the 1.18 handle, the EUR/USD pair gathered momentum in the NA session and broke above that level to refresh its weekly high at 1.1828. Although the pair failed to extend its gains, it's still looking to close the day higher. As of writing, it was trading at 1.1808, up 0.4% on the day.

The pair's upsurge seems to be fueled by the weakening greenback. In addition to a disappointing data from the U.S., falling US Treasury yields amid a weak market sentiment weighed on the buck, pushing the US Dollar Index to its lowest level since August 14 below the 93 handle. At the moment, the index is consolidating its daily losses around 93, losing 0.35%. According to the data released by the Federal Reserve Bank of Chicago, the National Activity Index dropped to -0.01 in July from 0.16 in June with the production, employment, and personal consumption sub-indexes all easing lower from their previous levels.

On Tuesday, the economic calendar will be featuring ZEW - Economic Sentiment data from Germany and the EU, which are both expected to move lower from their July levels in August, followed by the Housing Price Index and Richmon Fed Manufacturing Index from the U.S. However, the pair's reaction to tomorrow's data could stay limited as investors might refrain from taking large positions ahead of the ECB President Draghi's and the Fed Chairwoman Yellen's speeches in the Jackson Hole Symposium later this week. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "in the 4 hours chart, the pair has surpassed all of its moving averages, with the 20 SMA gaining upward traction, but still below the 100 SMA. Technical indicators in the mentioned time frame have eased partially from near overbought readings, but given that the price remains near its highs, chances remain towards the upside. August 11th daily high at 1.1846 is the immediate resistance, with a break above it favoring additional gains up to the mentioned 1.1909 yearly high and beyond."

According to the analyst, supports for the pair could be seen at 1.1780, 1.1745 and 1.1715 while resistances align at 1.1846, 1.1880 and 1.1910. 

• EUR/USD room for a test of the low-1.1600s – Scotiabank