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