EUR/USD should extend its post-U.S.
election gains but the rally is unlikely to break the broad 1.1300/1.1850 range that has held up since the summer.
The dollar and U.S. Treasury yields are slumping, tightening German-U.S.
spreads, which in turn has helped EUR/USD bounce off the 10-DMA and hit new short-term highs after clearing the 21-DMA.
Technicals also favor further gains, with RSIs biased up.
EUR/USD bulls will probably target resistance near 1.1550 and 1.1650 but gains beyond that will be difficult. If the election leads to political gridlock, as widely expected, that will keep U.S. economic growth unaltered for now but reduce the chances of any new fiscal stimulus.
Fed rate hikes should continue, which will limit German-U.S.
spread tightening and maintain the dollar's yield advantage. Meanwhile, Italy's budget tensions with Brussels should maintain uncertainty on the euro side of the currency pair.
Italian September retail sales saw significant declines from August's release, and weak data is unlikely to encourage the country's government to rein in the spending it has projected.
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