EUR/USD Daily Forecast – Euro Extends Rally to Fresh 9-Week High

EUR/USD pushed higher in early trading, in an attempt to post a fifth consecutive day of gains. The next area of upside interest falls near 1.12.
Jignesh Davda

EUR/USD Slicing Through Resistance Levels With Ease

One thing that stood out the most in EUR/USD trading last week was how easily the pair broke higher from seemingly important resistance. Technical traders will certainly be aware of this in the week ahead.

On Thursday, the pair faced resistance from a horizontal level at 1.1072. The level is quite important as it held the pair higher on several attempts between late July and August and lower in September.

On Friday, the pair traded near a horizontal level at 1.1129 that is considered well-respected as it held the pair higher on several tests from late April until the end of May. Further, the 100-Day moving average was near the level to offer a bit of a confluence.

But EUR/USD barely reacted to these technical inflection points and carried on higher, likely catching some market participants off guard. The price action goes to show how powerful the current rally and points to a general lack of sellers.

Positive developments in Brexit have aided the current rally although Friday’s UK parliament vote did not go as expected. Rather than voting to ratify the deal reached late last week, parliament decided to wait for implementation legislation to pass before voting on the deal itself. This move was to ensure that the UK is not forced to leave without a deal by October 31 in the event the implementation bill gets tied up in parliament.

Aside from Brexit developments, market participants will be shifting their attention to European monetary policy as the ECB meets this week. There is no exception for them to ease monetary policy after having done so at their last meeting.

Technical Analysis

Once again, EUR/USD is approaching an important resistance area. This includes a horizontal level at 1.1217 which carries confluence with the 200-day moving average.

EURUSD Daily Chart

As mentioned, the pair has not been respecting technical inflection points. For this reason, it will be important to see some confirmation of the resistance area holding.

The 1.1129 level that was considered resistance on Friday is now considered support. The 100-day moving average currently falls slightly above the horizontal level.

Bottom Line

  • Recent price action points to a display of strength in the currency pair.
  • The pair will be sensitive to further Brexit developments.
  • The ECB meets on Thursday, despite no expectations for further easing, the meeting should be a market mover.
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