EUR/USD Forecast: 1.2000/YTD top seems to be the next relevant bullish target

The EUR/USD pair added to the previous day's positive move and gained some follow-through traction on Wednesday amid persistent selling pressure surrounding the US dollar. Optimism over the development of a COVID-19 vaccine, along with clarity on the US political front continued weighing on the greenback's relative safe-haven status and was seen as one of the key factors driving the pair higher. It is worth recalling that President-elect Joe Biden was formally given a go-ahead to begin his transition to the White House. The USD remained depressed and fell to nearly three-month lows in reaction to mixed US economic releases.

The prelim US GDP report showed that the economic growth stood at 33.1% annualized pace during the third quarter of 2020. The reading matched advance estimates but was slightly lower than market expectations of 33.2%. Separately, the headline US Durable Goods Orders rose by 1.3% in October and orders excluding transportation also increased by 1.3%, both surpassing consensus estimates. The positive figures, to a larger extent, were negated by an unexpected jump in the Initial Weekly Jobless Claims. In fact, the number of Americans filing for unemployment insurance jumped to 778K for the week ended November 20.

The data suggested that imposition of new COVID-19 restrictions were boosting layoffs and undermining the labor market recovery. This, in turn, added to market worries about the potential economic fallout from the continuous surge in new coronavirus cases. Finally, the Michigan Consumer Confidence Index was revised lower to 76.9 for November and kept the USD bulls on the defensive. Meanwhile, the minutes of the 4-5 November FOMC meeting did little to influence or provide any meaningful impetus to the major. The minutes revealed that policymakers debated a range of options on bond purchases to support the economic recovery.

Despite the supporting factors, the pair trimmed a part of its intraday gains to the highest level since early September but managed to end the day above the 1.1900 mark. The pair maintained its bid tone for the third consecutive session on Thursday and held steady around the 1.1925-30 region through the Asian session. Market participants now look forward to the release of the German GfK Consumer Climate Index for a fresh impetus. That said, relatively thin liquidity conditions on the back of Thanksgiving holiday in the US might hold traders from placing aggressive bets and lead to a subdued/range-bound price action.

Short-term technical outlook

From a technical perspective, a move beyond the previous monthly swing highs resistance near the 1.1920 region might have already set the stage for a move towards reclaiming the key 1.2000 psychological mark. This is closely followed by YTD tops, around the 1.2010 region, above which the upward trajectory has the potential to push the pair further towards the 1.2065-75 intermediate resistance en-route the 1.2100 mark.

On the flip side, the 1.1880 region now seems to protect the immediate downside and any subsequent dip might now be seen as a buying opportunity. This, in turn, should help limit the downside near the 1.1855-50 region. That said, failure to defend the mentioned support levels might prompt some technical selling and accelerate the slide towards the 1.1800 mark. The corrective slide could further get extended towards the 1.1750-45 support zone, which if broken decisively might negate any near-term bullish bias. The pair might then turn vulnerable to weaken further below the 1.1700 mark, towards testing the 1.1625 intermediate support en-route the 1.1600 mark.