EUR/USD retreated from recent highs as coronavirus, economic and trade concerns dented its two-day surge and could call into question its break above resistance on Tuesday.
Bulls were confronting the possibility that EUR/USD's break above the 10-day moving average and trend-line off June's high was false, as it tested those resistances from the topside nL1N2E10NS during early U.S. trade on Wednesday.
Though German June Ifo data produced an upbeat surprise nL8N2E11QD, U.S.-European Union trade frictions nFWN2E104A weighed on the euro, as did the IMF's downwardly revised 2020 global GDP growth estimate and rising coronavirus cases nL1N2E10WQ, which drove flows into the safe-haven dollar and yen.
EUR/USD probed 1.1233/61 support, where the June 23 low, 10- 21-DMAs were located, as well as the trend-line off June's high.
A break of those supports would indicate a potential fall to 1.1165/70, though that support is likely to be formidable.
While risk aversion dominated on Wednesday, the Fed remains ready to act, which will keep U.S. interest rates FFZ1 near zero, thereby constraining dollar rallies.
EUR/USD downside should be limited, and an eventual test higher near 1.1500 nL1N2E012S remains likely.
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