EUR/USD Forecast: Bullish breakout sets 1.1500 handle as initial target
|The US Dollar drifted lower through Friday's trading session and was being weighed down by uninspiring monthly jobs report, showing that the economy added only 155K new jobs in November. The greenback was further pressured by some dovish comments by the Fed Governor Lael Brainard and St. Louis Fed President James Bullard, which added to recent speculation over a possible pause in the Fed rate hike cycle in 2019.
The USD selling bias helped offset signs of weaker economic growth in the Euro-zone and assisted the EUR/USD pair to build on its steady climb to finally end the week on a positive note, just above the 1.1400 handle. A revised reading of third-quarter GDP print showed that the region's economic growth stood an annual rate of 1.6%, just below the original estimate of 1.7%, though did little to prompt any fresh selling.
The USD bulls held on the defensive through the Asian session on Monday and pushed the pair further beyond the 1.1400 handle to near three-week tops. Meanwhile, rising US-China tensions, following the arrest of a top Chinese executive in Canada at the request of the US, continued weighing on investors' sentiment and might keep a lid on any runaway rally amid absent relevant market moving economic releases, either from the Euro-zone or the US.
From a technical perspective, the pair has managed to clear an important descending trend-line resistance, forming a part of a symmetrical triangle on the daily chart, and a follow-through up-move beyond 38.2% Fibonacci retracement level of the 1.1815-1.1216 recent downfall will further reinforce a near-term bullish breakout. Any further up-move has the potential to continue lifting the pair towards testing an important confluence hurdle, comprising of 100-day SMA and 50% Fibonacci retracement level, just above the key 1.1500 psychological mark.
On the flip side, the 1.1400 handle now seems to protect the immediate downside, below which the pair is likely to head back towards testing the 1.1345-40 horizontal support. A subsequent weakness below the mentioned support would negate the constructive outlook and turn the pair vulnerable to finally break below an ascending trend-line support, currently near the 1.1300 handle. The downwards momentum could drag the pair back towards challenging yearly lows, around the 1.1215 region.
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