The resilience of EUR/USD in recent weeks may be portending a period of surprising strength, with this Thursday's ECB meeting likely to be key for near-term direction.
EUR/USD had every reason to break significantly lower following Friday's strong U.S. non-farm payrolls report, which spurred a hawkish turn in Fed expectations.
The fact it didn't may force bears to pause.
While U.S. data has been generally better than expected, data from the euro zone hasn't been as robust, but the recovery remains on track and there are reasons to be more confident inflation has bottomed.
The spread between German and Italian bond yields has narrowed considerably, suggesting anxiety over a possible budget crisis in Italy has diminished.
trade tensions have also eased nL5N1VW3UI and prospects of an EU-UK Brexit deal have greatly improved in recent days nL5N1VW41J.
ECB President Draghi is likely to show his usual caution at the post-ECB press conference, but if he indicates the EZ economic recovery remains on track and inflation will continue to recover, it might encourage fresh EUR/USD buying.
Key resistance lies at the descending 100-day MA currently at 1.1691; EUR/USD has held below this reading since April 25 and a break above would likely spark a short-term uptrend.