EUR/USD rises above 1.1350 on broad-based USD weakness

• US Dollar Index drops below 97 in the NA session.
• Risk-on mood helps the euro gather strength.
• Italian budget crisis is likely to limit the euro's gains.

The EUR/USD pair gained traction and rose more than 30 pips in the last hour to touch its highest level in six days at 1.1362. As of writing, the pair was trading at 1.1356, adding 0.4% on a daily basis.

This recent upsurge witnessed in the pair seems to be a product of a broad-based USD weakness. The US Dollar Index, which spent the majority of the day in a narrow band above the 97 mark today, struggled to cling to its daily gains and was last seen down 0.1% on the day at 96.90. Although there were no clear catalysts that might have triggered a USD sell-off, an improved sentiment reflected by a strong rebound witnessed in Wall Street seems to be weighing on the greenback. 

The data released by the U.S. Census Bureau revealed that retail sales in October increased by 0.8% on a monthly basis to beat the market forecast of 0.5%. Earlier in the day, the Eurostat announced that the euro area trade surplus (seasonally adjusted) rose to €13.1 billion in September from €11.7 billion.

Although the pair remains on track to close the day in the positive territory, it could have a difficult time extending its rally in the upcoming days. An economic adviser for Italian Deputy Prime Minister Salvini, who yesterday said that the EU would make a big mistake if it tried to impose fines on Italy on its budget proposal, today claimed that Italy would exit the eurozone if the League party were to win the majority in the next general election. 

On Friday, markets will be paying a close attention to the eurozone October inflation report. Experts expect the annual core CPI to stay unchanged at 1.1% and a softer than expected inflation growth could put the shared currency back under pressure.

Technical levels to consider

The pair could face the immediate resistance at 1.1365 (20-DMA) ahead of 1.1445 (Nov. 8 high) and 1.1500 (psychological level/Nov. 7 high). On the downside, supports are located at 1.1300 (psychological level/Oct. 31 low), 1.1270 (daily low) and 1.1215 (Nov. 12 low).