EUR/USD fails to break 1.0750 wall, EU vs. UK vs. US

Currently, EUR/USD is trading at 1.0731, up +0.29% on the day, having posted a daily high at 1.0754 and low at 1.0693.

The shared currency battles a rogue bird as the Brexit saga continues on the UK's ongoing 'hard' negotiation scheme. As many market analysts mentioned in 2017 politics take over valuable data, which moves investors and traders to focus on body language and colloquial 'statements' by those in power. May's plans seem to look for further support far away from those willing to re-negotiate, but only time can serve the results of such action when heading to shake hands with a unique and unpredictable character as Donald Trump.

Historical data, however, indicates that EUR/USD highest performance clocked at +1.13% (Jan.5), and the lowest at -0.80% (Jan.18)

Surprises ahead, but don't be Surprise

Barbara Rockefeller, President at Rockefeller Treasury Services, notes that the biggie is the trade deficit on Thursday. We already know Trump intends to re-negotiate NAFTA and back out of TPP, but a surprise can come from the Thursday data and the Friday meeting with UK PM May. Trump intends to be disrupter-in-chief and Friday offers the perfect opportunity to disrupt. This is probably very good news for May and for sterling.

She further writes, "We are all going to have to go back to Econ 101 to get a handle on Trump's trade talk, which is riddled with misunderstandings and outright lies. But here goes: according to the World Bank, the US leads the world in the biggest dollar amount in trade, but trade is only 21.1% of GDP (2015 data). Of that, exports are only about 8.4% of total American economic output. In contrast, trade accounts for 38% of UK GDP and a whopping 70.7% of German GDP. Logically, the party that should be in Washington on Friday with hat in hand is Merkel."

New Allies versus Old Enemies

Peter Dominiczak, Political Editor at The Telegraph, notes that the Prime Minister will on Friday become the first foreign leader to hold talks with the new President in the White House following assurances by Mr. Trump’s team that he wants to do a major free trade deal with Britain that can be announced in the weeks after Brexit. One option understood to be being discussed in Whitehall is to agree to cut – or even drop – tariffs on items Britain and America already export to one another.

He further reports, "Sources believe any agreement on tariffs would give Mrs. May significant leverage in her negotiations with Brussels and allow her to demand that EU leaders give Britain a good deal. Government sources also said that Mrs. May wants to explore ways in which it is easier for US citizens to work in the UK and vice-versa."

EUR/USD: staying bearish despite rally through 1.0700 - Scotiabank

Technical levels to watch

In terms of technical levels, upside barriers are aligned at 1.0849 (100-DMA) and above that at 1.1032 (200-DMA). While supports are aligned at 1.0624 (low Jan.24) and below that at 1.0592 (50-DMA). On the other hand, Stochastic (5,3,3) seems to head north not too far from the overbought territory which indicates the euro has some upside potential available. 

On the long-term view, the pair trades slightly above 1.0706 (short-term 38.2% Fib), then the next logical resistance 1.0819 (short-term 50.0%Fib) makes a perfect target for risk-on traders. To the downside, 1.0566 (short-term 23.6% Fib) becomes the critical support if the euro wants to keep pushing up the current bullish momentum. A break below this level, would open doors and attract massive short-sellers towards parity. However, 1.0070 as the shared currency last stand, then makes the difference between an all-time low-bottom vs. parity.

EUR/USD: correcting lower, but bullish