Best analysis

The USD is getting trounced across the board as we roll into today’s North American session trade. The broad based weakness in the greenback has driven the EUR/USD to 2-month highs above 1.3900, the GBP/USD to 5-year highs above 1.6900, and the NZD/USD to nearly 3-year highs above .8750. While we’ve touched on GBP/USD and NZD/USD already this week, we haven’t had a chance to delve into the drivers of the EUR/USD yet.

From a fundamental perspective, the most recent catalyst for euro strength was today’s Services PMI data. Though not as strong as the corresponding release out of the UK, the report was generally constructive with the final Eurozone reading coming in at 53.1 as expected. Encouragingly, the data from regional laggard Spain was surprisingly strong, coming in at 56.5 vs. expectations of 54.3 and a previous reading of 54.0. Combined with a much better-than-anticipated unemployment report earlier today, the PMI report drove Spanish 10yr bond yields down to an all-time low of just 2.96%.

From here, traders will start to look ahead to Thursday’s European Central Bank meeting, though most expect the ECB to remain on hold despite the region’s ongoing battle with deflation. Last month, ECB President Draghi explicitly mentioned a rising euro exchange rate as a factor that could prompt the bank to act, and the EUR/USD has risen 200 pips since then, but most see the psychological 1.40 level as Draghi and Company’s tipping point; as long as the EUR/USD stays below the 1.4000 level ahead of Thursday’s ECB meeting, the central bank may remain on hold for another month.

Speaking of the price action, today’s rally has driven the EUR/USD through previous resistance at the 1.3900 level, bringing the 2.5-year high at 1.3965 to within striking distance. Today’s rally confirms the breakout from a 3-month symmetrical triangle pattern, but given the likelihood of ECB action if the pair continues to rally, we’re skeptical that the measured move target all the way up at 1.4300 will be reached.

That said, the pair is currently showing a Bullish Marubozu Candle* on the daily chart, suggesting strong near-term bullish momentum. Meanwhile, the MACD is showing growing bullish momentum by trending higher above its signal line and the “0” level. Finally, the RSI indicator has broken above its corresponding triangle pattern, confirming the move in price and strengthening the bullish bias. In the short-term, a continued rally toward previous resistance at 1.3965, followed by the critical 1.4000 level is favored, though a reversal back below 1.3900 would shift the near-term bias back to neutral.

* A Marubozu candle is formed when prices open very near to one extreme of the candle and close very near the other extreme. Marubozu candles represent strong momentum in a given direction.

Forex

This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. In the absence of high-tier data releases, the cautious risk mood helps the US Dollar hold its ground and forces the pair to stretch lower. 

EUR/USD News
GBP/USD declines below 1.2550 on renewed USD strength

GBP/USD declines below 1.2550 on renewed USD strength

GBP/USD loses its traction and trades below 1.2550 in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as trading conditions remain thin heading into the Christmas holiday.

GBP/USD News
Gold drops to $2,620 area as US bond yields edge higher

Gold drops to $2,620 area as US bond yields edge higher

Gold struggles to build on Friday's gains and trades modestly lower on the day near $2,620. The benchmark 10-year US Treasury bond yield edges slightly higher above 4.5%, making it difficult for XAU/USD to gather bullish momentum.

Gold News
Bitcoin fails to recover as Metaplanet buys the dip

Bitcoin fails to recover as Metaplanet buys the dip

Bitcoin hovers around $95,000 on Monday after losing the progress made during Friday’s relief rally. The largest cryptocurrency hit a new all-time high at $108,353 on Tuesday but this was followed by a steep correction after the US Fed signaled fewer interest-rate cuts than previously anticipated for 2025. 

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures