The solid rebound in the euro continues after hitting a double bottom around last week's low of 1.0926. Price has since jumped up by ~160 pips to trade at fresh two-week highs near 1.1090 in early European trading today.
As it stands, buyers are in near-term control and are in search of a more meaningful technical break higher. Currently, price is contesting near-term resistance @ 1.1085 (again) as well as the 50.0 retracement level @ 1.1088.
A break of those levels will see buyers eye the 1.1100-10 region next.
So, is this the start of a strong breakout in EUR/USD? I wouldn't get too carried away for the time being, not with the Fed still to come next Wednesday.
The near-term technical picture suggests that buyers are in control but there isn't much besides a relief rally to fundamentally suggest that the euro may track higher - unless economic data starts to improve on the back of the dovish efforts by the ECB yesterday.
It sounds a bit convoluted, doesn't it? Dovish monetary policy = stronger currency? Well, it's all about sentiment and focus. Right now, for the Eurozone, it's mainly trying to avert an economic disaster over the next 12-18 months.
If the ECB's stimulus package is "adequate" enough to bolster economic confidence and shore up inflation, then ultimately it can be viewed as a good thing. But I wouldn't count on that being the case as evident to what we have seen in the past.
But we'll see. Time will tell how things will play out on that front.
For now, the EUR/USD looks better for buyers but any confirmation of a trend breakout depends on the reaction to the Fed next week.