Today we would take a look at the EUR/USD currency pair. Over the past month this pair has been moving upwards with the euro taking advantage of a weakened dollar. Though the euro retreated a bit at the start of January, now we see the pair past the 1.22 mark, its best level since the end of 2014.
The euro right now is under the influence of strong fundamentals. The minutes of the most recent meeting of the European Central Bank indicated that the ECB is willing to consider an early phasing out of its current stimulus program based on how well the economies of various countries in the eurozone are performing. At the moment the most important factor here is inflation. The ECB would ideally like to see inflation across the eurozone approach 2%. Whether inflation is increasing at a satisfactory pace will become clear from the latest CPI report due this week.
The dollar, on the other hand, is still suffering a losing streak. The American currency has been declining all month, somewhat surprisingly, considering the Federal Reserve is still intent on having at least three interest rate increases in 2018, which should be supporting the dollar. It is most likely that the dollar is passively losing positions because investors are simply more interested in other currencies with more potential, such as the euro and the yen.
This is why we are fairly certain the EUR/USD would remain bullish in the near future. If inflation reports from the EU are disappointing, the euro might ease off the dollar, but we don’t expect this right away. The pair has already surpassed our daily pivot point at 1.2217, so we expect it to continue growing to the nearby resistances at 1.2257 and 1.2328. It is not likely that the pair will drop below the pivot, but if it does, watch out for the supports at 1.2146 and 1.2106. The indicators of technical analysis are unanimous in indicating a strong buy opportunity.
