EUR/USD extends weekly gains above 1.1150 as US Dollar weakens

• EUR/USD posts biggest weekly gains since June and highest close since August. 
• Key events ahead: Brexit vote (Saturday) and ECB meeting (Thursday). 

The EUR/USD pair rose broke higher during Friday’s American session and reached the highest level since late August at 1.1162. Near the end of the week, it is hovering around 1.1160, posting the best weekly result in months. The last leg higher took place amid a decline of the Greenback. 

US Dollar and Brexit 

An improvement in market sentiment and the deal between the United Kingdom and the European Union on Brexit boosted the pair during the week. Also, the Greenback pulled back across the board, adding more strength to the move higher in EUR/USD. 

The UK Parliament will vote on the Brexit deal on Saturday. The outcome will likely impact on the opening late on Sunday. The EUR/USD is likely to follow the direction (not the magnitude) of GBP/USD. 

During the week, the other key event will be the European Central Bank (ECB) meeting. Analysts at Wells Fargo explained that since the September meeting, economic data have if anything gotten worse but still, they do not think it will ease policy further at next week’s meeting. They see another 10bps rate cut in December. 

At Wells Fargo, economists are skeptical the ECB will do much more, “as its policy capacity with typical monetary policy tools, like rate cuts and QE, are clearly running low. At present, the Eurozone is running a consolidated budget deficit of about 1%, with some countries, such as Germany, in surplus. It looks increasingly likely that any meaningful positive policy shock will need to come from the fiscal side of the equation.”

In the US, the economic calendar is light for next week. US/China negotiations and trade-related developments will continue to be relevant for market participants. 

Technical outlook

In the long run, the bearish trend is finally giving some signs of easing, although there’s a long way ahead before a bullish trend surges, notes Valeria Bednarik,  Chief Analyst at FXStreet. “In the weekly chart, the pair is battling with a bearish 20 SMA, the first time around it since early August. The 100 and 200 SMA remain far above the current, while technical indicators continue advancing, approaching their midlines from below.”

According to Bednarik, the EUR/USD is crossing above its 100-day simple moving average, also for the first time since early August. “The Momentum keeps heading north, despite being in extreme overbought readings, while the RSI is barely decelerating near 70, favoring additional gains ahead, particularly if the pair closes the week above the critical 1.1160 resistance. Beyond it, the next possible target comes at 1.1200.”