EUR/USD inter-markets: fade the up move?

EUR/USD has gained over a cent since weekly lows in the 1.1120 area seen on Wednesday, not only retaking the 1.1200 handle but also advancing to multi-day peaks near 1.1250.

USD-dynamics, especially following yesterday’s FOMC meeting, has been behind the up move in the pair, although the downside in the greenback appears shallow a priori.

In fact, yields in the US money markets are supportive of the buck today and at the same time widening the differential spread vs. their German peers. In the same line, despite Fed Fund futures prices have retreated from recent tops, the Committee has yesterday pointed to a rate hike by year-end, with the probability of higher rates climbing to nearly 52%, according to CME Group’s FedWatch tool.

Still on the USD-side, the US Dollar Index (DXY) remains well underpinned by the support line off YTD low seen on May 3, today around 94.80, as proved by several test during august and September.

On the opposite side and favouring the ongoing risk-on sentiment, volatility tracked by VIX remains on its way down from last week’s tops near 19% to levels around 13.30%.

Regarding FX, and considering a continuation of the current upside in EUR/USD, the initial hurdle emerges at the 1.1260/80 band, home of the 23.6% Fibo retracement of the June-August up move and the resistance line off 2016 peak. If cleared, recent tops above the 1.1300 handle are next ahead of August’s top near 1.1370. On the other hand, there is quite a strong support in the 1.1160/50 region, where sit the 55-/200-day sma, and the 2014-2016 support line.