EUR/USD Has Made Significant Progress This Week
Technical Progress
The pair gains around 1% during the current week, as it reacted swiftly from Monday's losses and is on track to potentially post its best performance since at least May 2021.
Past Performance: Past Performance is not an indicator of future results.
From mid-November it had been moving sideways, but managed to break the range on the upside with multiple daily closes above its EMA200 on the H4 chart, covering more than half of its last leg down (October-November).
Near term bias in now on the upside and while the broader trend is still against it, the common currency tries to make progress on that front too. On Wednesday, it closed above the Ichimoku Cloud and it now tries to clear the 38.2% of the "September High/November Low" slump.
Back on the H4 chart, EUR/USD is now in apposition to tackle 1.1523-47, but we are still cautious about sustained upside and the 200Days EMA (at around 1.1620-30) looks distant at this stage.
Past Performance: Past Performance is not an indicator of future results.
Today, it faces some headwinds and the Relative Strength Index is at oversold territory, which can create pressure towards 1.1400. The downside seems to be well protected though from a technical prospective and a catalyst would be required for a break below mid-1.1300s that would put the pair's aspirations on hold.
Fundamental Inaction
The pair's advance this week, although impressive, has been mostly because of the US Dollar's demise and so much due the Euro's own strength.
The greenback has entered a phase were it is unable to benefit from the Fed's aggressive tightening prospects, while the bank's hawkishness may also be reaching a peak. Its seems that rate hikes and balance sheet run-off are well priced in by the markets, while Tuesday's hot US inflation did not lift the greenback.
Despite all these, the European central bank is still on the dovish side, despite December's decision to reduce the amount of asset purchases from March. As such, the monetary policy differential remains unfavorable and this theme may not be easy to provide sustained support to the pair.
From the economic calendar, we expect mostly US Retails Sales and Industrial Production and it will be interesting to see in what mood will NA traders enter today, before Monday's US holiday.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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