EUR/USD eyes daily lows after brief spike to 1.1590

• Euro recovery capped by 1.1590.
• Outlook favors downside after yesterday’s bearish developments. 
• US Dollar consolidates gains across the board. 

The EUR/USD pair rose quickly toward 1.1590 but found resistance around the 20-hour moving average and turned again to the downside. The bullish tone lasted few minutes and then it moved toward daily lows. It continues to trade near 4-month lows. 

The US dollar is up across the board on Tuesday while the euro remains weak, with EUR/GBP also contributing to the EUR/USD slide. The US Dollar Index, is testing 3-month highs slightly above 95.00. A break higher could signal more strength ahead for the greenback. 

Monetary policy divergence between the ECB and the Fed continue to be one of the main drivers in price action, particularly ahead of the December FOMC meeting. The better-than-expected economic data from the Eurozone is still unable to push the euro to the upside. Today’s report showed that retail sales jumped 0.7% in the euro zone. “As businesses indicate that hiring expectations are near decade highs at the moment, retail sales will continue to receive support from the labour market. As inflation remains weak, increasing sales volumes are to be expected over the winter months”, said  Bert Colijn, Senior Economist at ING.

Technical outlook 

EUR/USD showed that it remains weak after being unable to rise above the 20-hour moving average that stands at 1.1590. At the moment it trades at 1.1565/70, moving toward the downside again, still 30 pips on top of daily lows. 

“The pair has now room to extend its decline toward a critical price zone around 1.1460, the level that contained rallies through 2015 and 2016. The most likely scenario is that the pair would bounce on a test of the level, yet as long as below the 1.1660/70 region, the risk remains towards the downside, with further slides beyond the mentioned long-term support favoring an approach to 1.1000 during the upcoming weeks”, said Valeria Bednarik, Chief Analysts at FXStreet.