EUR/USD put in a breakout this week, running up to fresh two-month-highs even as US inflation printed at 7%.
As looked at last week, this appears to be more of a technical move after EUR/USD found support at a significant spot from Fibonacci levels at 1.1187-1.1212. That zone came into play ahead of Thanksgiving and after buyers held support above that area for the entirety of December, an ascending triangle formation began to build. Ascending triangles are often approached with the aim of bullish breakouts.
But - given that the breakout has hit - now what? The resistance zone that I looked at last week has already come into play, running from a Fibo level at 1448 up to the psych level at 1.1500.
Sellers have already started to swing at that resistance and given how oversold USD had become from the Wednesday breakdown, this makes sense. The bigger question is what's next, and prior resistance plays a big role for upcoming support. This plots at the 1374 level and as long as that remains as support, buyers have a chance to push up through the 1.1500 handle.
But, on a bigger picture basis the fundamental divergence between the Fed and the ECB is undeniable. The only question is whether markets have gotten too far ahead of themselves in pricing in tighter policy out of the FOMC for this year.
As looked at last week, this appears to be more of a technical move after EUR/USD found support at a significant spot from Fibonacci levels at 1.1187-1.1212. That zone came into play ahead of Thanksgiving and after buyers held support above that area for the entirety of December, an ascending triangle formation began to build. Ascending triangles are often approached with the aim of bullish breakouts.
But - given that the breakout has hit - now what? The resistance zone that I looked at last week has already come into play, running from a Fibo level at 1448 up to the psych level at 1.1500.
Sellers have already started to swing at that resistance and given how oversold USD had become from the Wednesday breakdown, this makes sense. The bigger question is what's next, and prior resistance plays a big role for upcoming support. This plots at the 1374 level and as long as that remains as support, buyers have a chance to push up through the 1.1500 handle.
But, on a bigger picture basis the fundamental divergence between the Fed and the ECB is undeniable. The only question is whether markets have gotten too far ahead of themselves in pricing in tighter policy out of the FOMC for this year.
