EUR/USD analysis: too far, too fast, but still bullish

EUR/USD Current price: 1.2272

• EUR/USD trades near a multi-year high of 1.2296 with the US down on holidays.
• ECB's officer Ardo Hansson said that the central bank could end QE "in one step."

Dollar's negative momentum continued this Monday, with the EUR/USD pair hitting a daily high of 1.2296, a level last seen in December 2014. The macroeconomic calendar was quite light, which combined with a holiday in the US left investors without fresh clues. The only piece of data relatively important was the EU trade balance, which posted a surplus of at €26.3B in November, above the previous €18.9B, but below the expected €22.4B. In the month, import rose 7.3% while exports of goods to the rest of the world increased 7.7%. At this point, however, seems speculative interest has gone too far too fast, particularly considering that the Fed is still in the tightening path and policymakers still pledge for three rate hikes this year, while easing continues in the rest of the world. Indeed, the ECB has been officially reducing QE and the BOJ is suspected to be in the same way, but both central banks are still far from tightening. That said, the decline of the American currency could continue as the market could remain illogic for longer than any account's equity balance life.

In the meantime, ECB's officers have started jawboning amid EUR's strength, with Governing Council member Ardo Hansson saying that the central bank could end QE "in one step"  without any problem, adding, however, that many eurozone countries are not prepared for an interest rate reversal. This Tuesday, German's inflation figures will take center stage, while the US will only offer the NY Empire State manufacturing index.

Technically, the 4 hours chart shows that the Momentum indicator eased from extreme overbought readings, as the pair has spent the last sessions consolidating near the early Europe high, but also that the RSI indicator consolidates at 82, and that the price holds far above its moving averages, with the 20 SMA heading sharply higher, but far below the current level, around 1.2100. A corrective movement seems likely on a break below Friday's high at 1.2218, the immediate support, which can reach 1.2150, where buying interest is expected to resurge. Beyond 1.2300, on the other hand, the advance will likely continue, with speculative interest then targeting 1.2500.

 Support levels: 1.2220 1.2180 1.2150

Resistance levels: 1.2300 1.2340 1.2375

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