EUR/USD Analysis: Holds steady near 1-week tops ahead of German CPI, US retail sales

The EUR/USD pair managed to regain some positive traction on Wednesday and climbed to over one-week tops, or levels beyond the very important 200-day SMA. The uptick seemed rather unaffected by a slight disappointment from the Eurozone economic data, showing that Industrial Production rose 0.2% MoM in November and the trade surplus shrunk to €20.7 billion during the same month. Traders took cues from a mildly weaker tone surrounding the US dollar, which failed to gain any respite from the conclusion of the US-China phase-one trade deal.

Softer USD supportive of the overnight positive move

The world's two largest economies signed the first part of their long-awaited trade agreement on Wednesday. However, the fact that the deal was largely priced in the market, the announcement had a muted impact on the greenback. Meanwhile, the US Vice President Mike Pence said that Phase 2 discussions had already begun as negotiators work to resolve differences. That helped boost investors' appetite for riskier assets and further weighed on the greenback's perceived safe-haven status against its European counterpart.

The pair finally settled just a few pips off daily tops and was seen hovering around mid-1.1100s through the Asian session on Thursday. Market participants now look forward to the final version of German inflation figures for December – expected to come in at 1.5% YoY rate – for a fresh impetus. Later during the early North-American session, the US monthly retail sales data for December might influence the USD price dynamics and further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair already seems to have found acceptance above the 1.1140 confluence region – comprising of 200-DMA and 38.2% Fibonacci level of the 1.0981-1.1239 positive move. Some follow-through buying now has the potential to lift the pair further beyond the 1.1200 handle towards retesting the recent swing high resistance near the 1.1240 region. The momentum could further get extended towards the 1.1300 round figure mark en-route a resistance marked by the top end of a multi-month-old ascending trend-channel, currently near the 1.1340 region.

On the flip side, any meaningful pullback now seems to find decent support near 50% Fibo. level, around the 1.1100 handle. This is closely followed by 61.8% Fibo. level near the 1.1080 region, 100-day SMA and the lower end of the ascending trend channel, around the 1.1050 region. A sustained breakthrough the mentioned support levels might be seen as a key trigger for bearish traders and set the stage for a fall back towards challenging the key 1.10 psychological mark.