EUR/USD Pulls Back After Rally

Euro Is Losing Ground Against U.S. Dollar

EUR/USD is currently trying to settle below the support at 1.1435 while U.S. dollar is moving higher against a broad basket of currencies.

The U.S. Dollar Index is currently trying to settle above 95.50. In case this attempt is successful, the U.S. Dollar Index will move towards the resistance at the 50 EMA near 95.75 which will be bearish for EUR/USD.

Germany has recently released Industrial Production report for December which indicated that Industrial Production declined by 0.3% on a month-over-month basis compared to analyst consensus which called for growth of 0.4%. This report may have a negative impact on the euro and serve as an additional excuse for traders to take some profits off the table after the recent rally.

Foreign exchange market traders will also focus on general market sentiment ahead of the key U.S. inflation data, which will be released on Thursday. Most likely, markets will remain volatile as traders continue to evaluate whether Fed will have to raise rates aggressively or it can limit itself to 3-4 hikes this year.

Technical Analysis

EUR/USD is testing the support level at 1.1435. In case this test is successful, EUR/USD will move towards the next support level which is located at 1.1420.

In case EUR/USD declines below the support at 1.1420, it will move towards the next support level at 1.1390. A successful test of this level will open the way to the test of the support at 1.1370.

On the upside, the nearest resistance level for EUR/USD is located at 1.1450. RSI remains in the moderate territory, so there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

If EUR/USD manages to settle back above 1.1450, it will head towards the resistance at 1.1465. A move above this level will push EUR/USD towards the next resistance level which is located near the recent highs at 1.1485. In case EUR/USD moves above this level, it will head towards the resistance at 1.1515.

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