EUR/USD Forecast: Bullish breakout, more gains in the docket

EUR/USD Current Price: 1.2047

• Tepid US data and renewed stimulus hopes undermined the greenback.
• Inflation in the EU worsened further in November, down to -0.3% YoY.
• The EUR/USD pair trades at fresh two-year highs and could keep on going.

The EUR/USD pair soared to fresh 2020 highs this Tuesday, as optimism and dismal US data hit the greenback. The pair reached 1.2054, a level that was last seen in May 2018, following news that a group of US bipartisan lawmakers offered a new $908 billion COVID-19 relief package. Talks between House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell stalled ahead of the presidential election. The November US ISM Manufacturing PMI contracted to 57.5 from 59.3, worse than anticipated and adding pressure on the greenback. The employment sub-component plunged to 48.4 from 53.2 in October.

Market players ignored soft European data, as the annual EU’s CPI fell to -0.3% YoY in October, while Markit downwardly revised the German’s Manufacturing PMI, but upgraded the EU index. This Wednesday, Germany will publish October Retail Sales, foreseen increasing by 1.2% MoM, while the US will release the ADP Employment report, with the private sector expected to have added 420K new job positions in November.

EUR/USD short-term technical outlook

The EUR/USD pair is trading near the mentioned daily high as the US session comes to an end, maintaining its bullish bias in the near-term. From here, it has room to extend its gains to 1.2083, May 2018 monthly high. In the 4-hour chart, technical indicators consolidate near their daily highs and at overbought levels, far from supporting an upcoming decline. The 20 SMA accelerated north far below the current level yet above the larger ones, all of them reflecting the strong buying interest.

Support levels: 1.1920 1.1880 1.1840  

Resistance levels: 1.2085 1.2130 1.2175

View Live Chart for the EUR/USD