EUR/USD rebounds toward 1.1850, holds onto weekly gains

• EUR/USD about to end the week with a 125-pip gain.
• US dollar stages modest recovery during the American session.

The EUR/USD pulled back during the American session amid a recovery of the US dollar across the board. The pair fell from 1.1860 finding support above 1.1825. It is hovering around 1.1840, 125 pips above the level it had a week ago.

Despite Thursday’s correction, EUR/USD is holding onto recent gains, about to post the highest weekly close since August. The key driver has been a decline of the US dollar. The DXY stands below 93.00, on its way to the lowest weekly close in seven weeks.

The dollar is about to end the week on the back foot ahead of critical days. It will be the week before the US Presidential elections, more talks and uncertainty about fiscal stimulus and many economic reports. In Europe, the key event next week will be on Thursday with the European Central Bank meeting.

Technical outlook

The EUR/USD retains its long-term bullish bias according to Valeria Bednarik, Chief Analyst at FXStreet. “The pair has continued to range above a bullish 20-week SMA which advances way above the larger ones. Technical indicators remain without directional strength although well into positive levels.”

The daily chart indicates a neutral technical stance, with the risk also skewed to the upside, as the pair has recovered above its 20 DMA on Monday, holding above it for the rest of the week, noted Bednarik.