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EUR/USD Daily Forecast – Euro Extends Rally to 4-Month High

By:
Jignesh Davda
Published: Dec 30, 2019, 09:46 UTC

EUR/USD surged higher on Friday and is seen adding to gains in the early day to trade at levels not seen since the middle of August.

EUR/USD

EUR/USD Lingers Around 1.1200 Handle

EUR/USD had its best day in over four months on Friday, gaining just over 0.7% in a single day rally. The pair extended a bit higher in the early day to break to fresh highs not seen since the middle of August.

The move was unusual for the currency pair which has otherwise traded in tight ranges from the past month or so. It also served to break the pair higher from well-watched resistance. Over the near-term, the pair is seeing some mild selling pressure, however, Friday’s upward momentum should serve to keep the pair bid on dips.

The economic calendar is quiet in the early week, and holiday-thinned trading on Tuesday and Wednesday could set the stage for some unpredictable price swings.

Earlier today, Spanish inflation was reported to rise in December although a tick less than the analyst estimate. The Chicago PMI figures will be released later in the session which could accompany some volatility in the currency markets. The highlight this week will likely be the FOMC meeting minutes which will be released on Friday.

Technical Analysis

Two major technical developments resulted from Friday’s rally. First, the pair broke above its 200-day moving average. This is an indicator the exchange rate has not traded above on a sustained basis since early 2018. There was an attempt to scale it in June although it was short-lived.

EURUSD Daily Chart

The second technical development is that the pair has rallied above a declining trendline that connects the September high with the highs posted in June. Both the trendline and mentioned moving average fall close to 1.1140.

Any near-term declines would need to stay above this resistance turned support area to maintain the recent upward pressure.

Resistance in the session ahead is seen at 1.1217. This is a level that has triggered some notable turns on a daily chart. To the downside, the first level of support is found at 1.1173. This level served to hold the pair lower on several attempts between the middle of October until the middle of December.

Bottom Line

  • EUR/USD is showing some renewed upside momentum after Friday’s bullish rally.
  • The pair trades near major resistance at 1.1217.
  • The economic calendar is light this week and holiday-thinned trading in the early week might result in unusual price swings.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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