EUR/USD has regained its traction after dropping to two-week lows. The pair is holding above 1.10 but it could find it difficult to break above the 1.1040 resistance, FXStreet’s Eren Sengezer reports.

Euro recovery likely to be capped at 1.1040

“The fundamental outlook highlighted by the policy divergence between the Fed and the ECB should continue to favour the dollar over the euro, suggesting that the pair's recovery attempts are likely to remain technical in the near-term.”

“On the upside, 1.1020 (50-period SMA) aligns as interim resistance ahead of 1.1040 (Fibonacci 50% retracement of the latest downtrend). In case the latter turns into support, the next bullish target could be seen at 1.1080 (Fibonacci 61.8% retracement).”

“Immediate support is located at 1.10 (psychological level, Fibonacci 38.2% retracement, 100-period SMA) before 1.0960 (static level) and 1.0940 (Fibonacci 23.6% retracement).”