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EUR/USD Technical Outlook: Upward Momentum Intact

EUR/USD Technical Outlook: Upward Momentum Intact

Manish Jaradi, Strategist
What's on this page

US Dollar, Euro, EUR/USD - Technical Outlook:

  • EUR/USD’s upward momentum is intact.
  • However, a consolidation can’t be ruled out.
  • What are the signposts to watch?
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EUR/USD TECHNICAL FORECAST – SLIGHTLY BULLISH

Upward momentum in the Euro remains intact against the US dollar after the European Central Bank (ECB) indicated a much higher rise in rates than anticipated by markets.

At its meeting earlier in the week, the ECB raised its benchmark rate by 50 basis points to 2%, in line with expectations, and signaled further tightening ahead to combat inflation. At a press conference, ECB President Christine Lagarde indicated a similar hike at the next two meetings, triggering a repricing in the benchmark rate by market participants to 3% by July from 2.75% before the meeting.

EUR/USD Daily Chart

image1.png

Chart Created Using TradingView

EUR/USD, up nearly 13% since making a 20-year low in September, earlier this month rose above key resistance on the 200-day moving average, coinciding with the August high of 1.0370, near the January 2017 low of 1.0340. The series of higher-tops-higher-bottoms since September confirms that the short-term trend remains up. Moreover, momentum as indicated by the 14-day Relative Strength Index continues to be buoyant.

EUR/USD Weekly Chart

image2.png

Chart Created Using TradingView

The pair now faces another converged barrier: the 89-week moving average, a downtrend line from April, the 2020 low of 1.0635, and the early-June high of 1.0785. To be sure, a reversal is by no means imminent while EUR/USD continues to make new highs on a weekly basis. The single currency needs to stop making new highs / consolidate before it retreats meaningfully.

EUR/USD 240-minutes Chart

image3.png

Chart Created Using TradingView

In this regard, the focus is on the immediate cushion on the 240-minute charts: the 89-period moving average, the mid-November high of 1.0480, around the December 7 low of 1.0440. A break below this area is needed to confirm that the upward pressure was fading. Given the strong momentum on the daily chart, it is quite possible that EUR/USD could go sideways/consolidate in the coming days, instead of making an abrupt turndown.

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--- Written by Manish Jaradi, Strategist for DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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